PAP 1301 Lecture Notes - Lecture 14: Business Cycle, Laissez-Faire, Microeconomics
17 Jul 2014
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Understanding what austerity about: roots found in 19th century, was the norm i. Took out of government"s hands a policy tool, instead of printing. Gold simply stores value, convert money into gold (amount. Gold standard: currency value were linked to gold. 1. money, so governments had to be austere when things went wrong. Way to guarantee payments, could exchange money for. Constant/cyclical deflation and inflation, government did nothing a. In terms of imports and exports and international exchange. Exports more expensive, less competitive, imports i. cheaper, raised wages. Worked because: there was no democracy, didn"t have too worry about i. repercussions, franchise wasn"t open to everyone i. economic growth. Austerity deepened the recession when resurrection, has never revived a. Procyclical budgeting: recession spend less, surplus spend more. Best time to undertake cuts when business cycle goes up a. Idea: governments shouldn"t do anything, pull back or else make things worse i. come eventually.
