gov econ policy :: essays research papers

Government Economic PolicyIn 1988 the government of the day was at a downswing of the business cycle with high unemployment footstep (UE%) coupled with high inflation. This caused the real income (YR) to fall. The populus of Australia had little purchasing condition causing the add up demand to fall (D). With the people of Australia spending less and firms non selling enough inventories the government (G) had less taxation receipts and with firms trying to cut costs, they laid off workers. This caused G non-profitable expenditure (G1) to growth and thus caused deficit budgets. This is when cloak-and-dagger Investment (I), Economic Growth (GDP) and Private Consumption started to fall tremendously. In later years the G borrowed funds from other nations because worsening Fiscal policy. The trouble was that the G was borrowing to dedicate G1 expenditure not G2. This caused a lack of I multiplier inwardness within the economy. The lack of money circulating in the economy let down the Production Possibilities Curve (PPC) making the nation not able to proffer enough goods and services for the people. If we look at the aggregate supply comparability ( supply= GDP+ imports (M)), when GDP falls imports are the only plectron have enough supply to satisfy the economy. Making the overseas domain the only means cheap enough to buy goods and services from. then this acted as a leakage because money was flowing into other nations and not into Australias. The PPC graph shows Australias shift in GDP with the PPC moving from A to B. therefore the difference between A and B is imports.This made scotch conditions worse. As a result of the high inflation and UE% the national savings pool and thus private investment fell and foreign self-command rose. With all the money going out of the Australian economy and into others this caused stagflation. Stagflation occurs when an economy doesnt grow (GDP doesnt increase) but inflation increases. The inflation case is cos t-push inflation. This graph shows cost-push inflation by showing the shift in aggregate supply causing a shift in the price (due to the integrity of demand) thus causing inflation, but in this case stagflation.Finally the Australian economy is busted AKA recession. This was due to a number of factors one of these was the toll of Trade (TOT) falling. This caused Australias main industry agriculture to be disadvantageously effected. With the Interest rates ( I %) rising for long periods of time this caused toilsome decline in private investment, lessening the multiplier effect.