Imagine you are a columnist or have been contracted to write an opinion piece, for a quality publication such as The Economist o - Assignment Example

Download file to see previous pages A good example is what is being witnessed in Greece where the economy has been observed to decrease by 5% every year. Governments should adapt to the idea of spending to boost the economy and also concentrate on balancing the books as the private sector facilitates the economy rise. It is strange how the people who believe in austerity see this as an impossible move and believe that you can not spend when you got a debt. Keynes Theory The stimulus vs. austerity argument arises the debate about if the money supply should be increased or reduced. The difference between function one and function three views of money brings up a big debate. Also the creditors and debtors have a conflict of interest here. Creditors prefer the level three. They are more concerned with the store of value and want their money to increase value and be worth something when they are paid back. Debtors propose to earn the less money and pay back real terms. Multiplier The battle between austerity and stimulus mainly bases around money as a vital factor that greatly determines there strength. Money functions are sub-divided into three which include: a medium of exchange, a unit of account and a measure store of value. These three functions bring out the difference between the stimulus and austerity. ...
10) Money also functions as a unit of account where it is basically used as a common unit for measuring the difference in value between two commodities or more. For example in barter trade economy, you can exchange two sheep for three goats whereas in the money economy you can value the goats for six shillings. Money functions as a unit of account in that it tells what things are worth. For example a sheep is worth three shillings and a goat at two shillings. The other function of money is as a store of value, in this sense, money is attributed by the fact that it cannot be spend immediately it is gained. The view of money as a physical medium of exchange improves the economy positively. An increase in physical exchanges increases the level of trade thus leads to quick economy growth. If money is perceived as a store of value then it will negatively contribute to the economy .The less the amount of money stored, the more valuable it becomes. Restriction on the amount of money in supply increases its value. Problems of Applying A Keynesian Stimulus Everyone would agree with the fact that we are facing an economic crisis. Some people believe that this situation is caused by the government giving promises it can not deliver in the long run and the best way to solve this remedy is by austerity. Whereas other people think that it is due to the private sector inability to create jobs and growth and prefer stimulus .The stimulus folks point to Europe to indicate that austerity has failed. This did not only cure economic problems but it was also rejected at the polls. On the other hand austerity switches blame to the United States and argue that stimulus was disguised. It is strange with ...Download file to see next pagesRead More