COURSE NAME: MANAGERIAL ECONOMICS

Lesson 7 Discussion Forum

Discussion assignments will be graded based upon the criteria and rubric specified in the Syllabus.

For this Discussion Question, complete the following.

Question

Read the first 13 pages of the attached paper which discusses the effect of government intervention on recessions.  

Instructions:

1. Locate one journal article for each of your two chosen economic types. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.  

2. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.

3. During the second week of the Module, you will need to reply to the posts of two of your peers. Your replies must focus on increasing knowledge of the class and must advance the discussion further. Simply affirming your peers does not count as a substantive reply. 

4.Please post (in APA format) your article citation.

5. Please provide 3 references under the discussion.

6. Please post replies to 2 of my classmates each 250 words and their discussions are provided below.

Supplemental Resources: – Material Read first 13 pages

Classmate post 1 by Adithya Narayanan – Monday, 14 September 2020, 9:29 AM

Number of replies: 0

Effects of Government 

Abstract

Recession is a time or period when the whole country’s economic value falls and everybody will be a crisis for goods and resources. The prices will be more due to fewer products and people will start losing their jobs as the company will not have sufficient money to pay their workers and employees. The prices of everything will be increases due to recession but unemployment makes the situation of people so worse that they can’t buy anything. The GDP rate will fall. Only the people who kept fixed deposits in the bank and invested money on real estate and stocks will be benefited.

Introduction

The government should intervene and must help the public by distributing money to them and organizations for proper functioning and a stable economy. The government should provide food grains and minimum requirements to the poor people who cannot afford it during the recession. The government should think of all possible ways to reduce unemployment. During the recession, the government should provide free health services in public hospitals. There are chances of rich and middle-class people bringing up disputes if the government will not help them and they will think the government is showing inequality (German-Soto & Brock, 2020).

To pay salaries the companies have to increase the prices of the products which will ultimately affect everyone again. The government should also provide free transportation facility to the people which are also a huge budget for the government to provide everything for free. The schools and colleges will increase the fees and with this, the students will face difficulty and many will stop their education for not being able to pay the fees. There will be many dropouts and this is will cause huge damage to the student’s career (Horwitz, 2012).

Results and Conclusion

To stable the economic level the government should not let the cost of products increase as it will cause difficulty for the public to purchase. The banks should provide loans to the needy and help the small businesses so that they don’t get affected.  During the recession also, the companies should not stop hiring the workers and not fire any workers. The companies should stabilize their situation by taking loans or selling any assets (MAIA & et, 2019).

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Classmate post2: by Mounika Poonati – Wednesday, 23 September 2020, 11:44 AM

Number of replies: 0

Liang, M. I. N. (2010). Government Intervention, Debt Finance, and Firm Value in the Recession Period: An Empirical Research on Listed Companies [J]. Finance and Trade Research2.

One of the economics concerns is the extent of government intervention in the economy. In the free markets, economists suggest government intervention should be limited as it causes the insufficient allocation of resources. Consequently, other economists argue in support of government intervention in distinct fields, such as externalities and monopoly power, Liang (2010). In a recession, there is a continuous deficiency in the aggregate demand pushing the economy to new levels of unemployment and reduced outputs.

Government intervention will ensure increased private sector spending to boost the economy out of recession. Consequently, stimulating the personal sector growth will relatively reduce government spending and increase revenues through taxations to facilitate faster growth of the economy. Ideally, instead of using monetary and fiscal policies to exchange private sector spending, the government establishes an economic stimulus in direct spending to cut taxes and lower interest rates. Moreover, this will influence private sectors in the economy to be active in economic growth. Government intervention affects personal sector consumption and investment spending.

During recessions, private sectors experience a fall in investment and spending, which leads to lower economic growth, Liang (2010). When the government reduces spending simultaneously, there is a possibility of a massive fall in economic development and a collapse in confidence. Regarding deep recessions, the government borrows from the private sector and uses the funds to employ dull resources. Consequently, failure in the money supply attributes to the Central Bank or government to print money. Further, the government needs to prevent the explosion of credit and economic boom through positively influencing fiscal and monetary policies. Monetary policies will encourage financial stability through incentives and grants. During a recession, the government increases spending and reduces taxes to expand economic growth.

Tucker, A. (2011). Government Intervention in Clean Energy Technology during the Recession. Tex. Envtl. LJ42, 347.

The prevailing economic conditions are an indication of a global recession since financial markets are crumbling. The gross national product in most states has reduced, the unemployment rate is high, and large financial institutions face nationalization. Consequently, government spending on merit and public goods during a recession can create excess inefficiency and bureaucracy, Tucker (2011). Government spending on available goods will influence the aggregate demand of the public. Ideally, government parastatals are limited to any revenue incentive, which explains the mismanagement.  On the other hand, the privatization of state-owned industries leads to substantial efficiency savings.

State-owned industries are managed with politicians who lack the market discipline in maximizing the limited resources. Most of the companies are prone to mismanagement. Further, government intervention on the economy cases more challenges than solutions. For example, the government can support the longevity and survival of inefficient firms in the economy. In instances where the government offers incentives to banks to avoid bankruptcy, it creates an ethical threat where banks will expect handouts from the government. Moreover, economists suggest that the best government intervention makes little difference to the duration of the recession, Tucker (2011). Instead, it creates more challenges—for instance, the accumulation of public sector debt.

Government intervention is essential in maintaining economic growth and stability. In regards, State protection is vital to safeguarding property rights and national spending. The state spending should focus on encouraging investments rather than consumption. Consequently, the expenditure on the national government should eliminate wasteful and unnecessary spending. In a recession, governments should aim to improve economic performance for future expectations. In boosting the level of demand, the economy adjusts to long term productivity. Government strategic policies will influence the longevity of the economic recession.

References

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