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Essay / Research Paper Abstract
In the Keynesian model of economics increasing public spending to the extent of creating a deficit is a way of stimulating an economy. This tool, which has been used successfully is now claimed by some to be a false model and that will not stimulate an economy into growth. The paper assesses this perceptive including the model of rational expectation. The bibliography cites 7 sources.
Page Count:
8 pages (~225 words per page)
File: TS14_TEpubspd.rtf
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Unformatted sample text from the term paper:
With theories such as the trickle down effect or the multiplier effect from the Keynesian economists the value of the government spending to simulate the economy has been a model
accepted by many for a considerable time (Sheinbaum , 2002). It is only in fairly recent times that this model has been questioned.
The idea is that spending will create money in the economy which will in turn create more demand which will create more jobs. These will then create more wages
which will create yet more demand. On all these wages, and also sales, there will be an increase in taxation income with the economic growth, so that the money
spent, ort invested in the economy will be recouped by the government in the longer term. This appears to be a very simple model, with the back up of the
Great Depression in the United States cited as proof of the accuracy of the model (Hagemann, 2002). However, for the management of a countrys economy in the modern world, especially
that of the developing world, past proof is not necessary sufficient, especially where the spending will create a large public spending deficit, on which there may be high levels of
interest payable if the tactic does not work as expected. The risk to a developing economy may be in the erroneous use of a model, that was shown to work
in a situation very different, and the danger of accepting the proof that is often presented. However when looking at the great depression the proof is not as convincing and
it may be, with many causes identified and as such it is unlikely that the simple single tool was the sole cause of the recovery (Hagemann, 2002). If a
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