Question
Once you explain your proposed expenditures, apply modern money theory as it is presented by Stephanie Kelton in her book The Deficit Myth in order
Once you explain your proposed expenditures, apply modern money theory as it is presented by Stephanie Kelton in her book The Deficit Myth in order to explain where you will get the money to carry out your suggested government expenditures.
Proposed expenditures- The government should focus/emphasis on restoring the lost demand in an economy by the means of fiscal stimulus packages like reduction in taxes, increase/rise in government spending, provision of subsidies, and so on in order to deal with the problems of unemployment and lesser production in times of COVID-19 pandemic. The introduction of such packages will infuse the required liquidity in the economy, thus increasing the ability of consumers to buy goods and services.
Explanation:
JM Keynes, one of the greatest 20th century economists propounded the Keynesian model. The Keynesian model advocates demand-side economics to illustrate the fluctuations in an economy during the short and the long run. The school of thought that idealizes Keynesian economics believes in fiscal stimulus packages to eradicate the problem of unemployment and lesser production which plays a pivotal role in lifting out the global economy out of slowdown and recession.
The COVID-19 breakout marked one of the most unprecedented events in economic history. The COVID-19 pandemic caused worldwide disruptions in the global supply chains- firms were shut down, workers were laid off, departmental stores were closed. The disruption hampered the firms' path to the pre-covid quantities and prices as they were unable to restock the lost production and faced increased cost of raw materials that increased the product price. The consumers were not in a position to demand the goods at higher prices. The virus caused a demand lump and demand-supply loop in the economy. This in turn reduced the economic productivity, AD (Aggregate Demand) and output.
The Keynseian model focuses on the role of government in lifting out the economy from unemployment and sluggish growth. The government should aim at increasing the spending by adopting expansionary fiscal policies. Some of the expansionary fiscal policies that should be adopted by the government include a rise in expenditures of the government or decrease in taxes.The increase/rise in government expenditures can also be offset by an equal decrease in the taxes (T) so that the budget of the government remains balanced. Such expansionary fiscal policy stimulates economic growth and employment by raising the aggregate demand and investment which enables both the consumers as well as the firms to restore their lost expenditures and profits.
The following diagram shows the impact of expansionary fiscal policies on the price and the output level:
In the above diagram, price is shown along Y-axis and Real GDP (Y) is shown along X-axis. The LRAS (Long run average supply) curve is vertical at the output level of full employment (Y2). The SRAS (Short-run Aggregate Supply) curve is downward sloping while the Aggregate Demand (AD) would be upward sloping. Let suppose that in the starting, the economy is functioning in the recession at point A. The level of real GDP is Y1, which is less than the full level of employment (Y2). When the expansionary fiscal policies are undertaken by the government, for instance fall in taxes (T) or rise in government spending (G), there is an increase in aggregate demand. This increase is reflected in the rightward shift of the AD curve. The two curves-AD and SRAS now intersect at point B. The output level has risen from Y1 to Y2 restoring the full level of employment, thus resulting in higher production and economic growth.
The government spending should be directed towards the manufacturing, consumer durables, social (education and health) and services sector. The aggregate demand should be stabilized in each of these sectors that would increase the real GDP (Gross Domestic Product). The introduction of such packages will infuse the required liquidity in the economy thus increasing the ability of consumers to buy goods and services and deliver better results in terms of fighting against the COVID-19 pandemic.
1.A monopolist has the following demand functions for two segmented markets and cost function
Q1=64-0.8p1Q=36-0.2p2C=100+80Q
Required;
i. Calculate the maximum output and price of each market and the optimal profit of monopolist
ii. Verify whether the output maximizes profit
2. Discuss the characteristics of isoquants
3.write short notes on the following microeconomic concepts
i. Edge worth box
ii. Slutsky substitution effect
4. Using a diagram discuss the three stages of production. Explain why it is not technically efficient for the producer to produce at stage 1 and 3
5.Write notes on the equilibrium in perfectly competitive markets
6.Distinguish between short run and long run periods of production
7.Define price discrimination. Discuss the monopolist degrees of price discrimination
8. Using a well labelled diagram, discuss income effect and substitution effect of price change
9. State and explain whether the following statements is true or false
i. Consumer is at equilibrium when marginal rate of technical substitution is equal to ratio of commodity prices
ii. In cardinal utility approach what matters about utility is whether the consumer can rank consumption bundles according to the level of satisfaction
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