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Nigeria, Policy #3: Expansionary monetary policy, -, -, -, -, DO NOT TOUCH…
Nigeria
Policy #2: Investment in infrastructure/ defense force
Creates more jobs and skilled work for underemployed Nigerian population - Increasing AD
Use of government budget to improve infrastructure/ defence force
Improvement of education infrastructure
With better infrastructure, potential EG occurs. This lowers inflationary pressures
increase in infrastructure - can build facilities like schools that can increase jobs
Preventing impact of extremist groups on Nigerian infrastructure and society
Pros
Creates jobs
Could reach full employment potential
Long run economic growth from improved infrastructure
Improve HDI, SOL from better security and more jobs, reduces poverty
Reduces income inequality
Cons
Increase AD, could potentially cause demand-pull inflation
Opportunity cost from government spending, could have been spent on the provision of other merit goods
Possibly increase market failure
Increase debt (text b, par 4) - little money available in account
Policy #1: Investment in Education/ Skills Training
Interventionist supply-side policy
POSITIVES
Betters Skills = Higher Income = Increased HDI
Expansion of the Production Possibilities Curve
Long-Run Economic Growth (Rightward shift of the LRAS curve)
Betters Skills = Higher Income = increased HDI
Increased literacy rates = increased HDI = greater economic development
NEGATIVES
Long run policy
Opportunity cost of Government Expenditure
The Populations Education will Surely Rise and Eventually Lead to Revolt, Spawning Generations of Civil War
Policy #4
Improving information flows
in the labour market
Pros
More workers, increase qty of FOP, shifts LRAS curve rightwards. In the LR, the increase in labour brings down wages --> reduce cost of production.
Tackles the underemployment caused by the shortage of skills.
Cons
Text A, P5: Lack of diversification, economic structure does not have sufficient manufacturing jobs for the higher skilled youth.
Text A, P5: Lack of human capital slows down economic diversification.
May not be effective depending on the mindset of the workers. If workers have a preconceived bias of certain jobs, they will resist joining that industry
What it Looks Like
Issues
Raff's Group
HIGH UNEMPLOYMENT (TABLE 1)
CORRUPTION (PARAGRAPH 3)
HIGH INFLATION (TABLE 1)
DOMESTIC TERRORISM
ADULT LITERACY RATE (TABLE 2)
LOW ADULT LITERACY RATE (51.1%)
CURRENT ACCOUNT DEFICIT (TABLE 1)
HIGH INCOME INEQUALITY (gini coefficient 0.4)
Alex's Group
High Dependence on Oil/Gas Industry
Economic Growth is dependant on global oil/gas prices
Unemployment
Violent Extremist Group
percentage of population is unable to access merit goods
Further Decrease in adult literacy
Unemployment Rises
Market failure (oil spills)
Underemployment
Caused by a lack of jobs for the Nigerian youth.
Lack of skills
Govt trying to improve skills of the workforce through education
Policy #3: Expansionary monetary policy
Decrease interest rates
decreased incentive to save
increase in consumer expenditure
Lower interest rates attracts hot money inflow from investors from abroad. This causes a deficit in the financial account
This leads to a balance of payments deficit which then means more money is leaving the country than entering, hence the external debt increases.
Combining worsening balance of payments with increasing external debt means the country becomes poorer
Increase money supply
Open-market operations
Central banks buy bonds from commercial banks
Consumers with more money gives them a larger disposable income so they increase consumer spending which is a component of AD thus real economic growth is achieved
Decreased required reserve ratio
Commercial banks can lend out a greater proportion of the deposits as loans to consumers
Decrease discount rate
Commercial banks can borrow more from the central bank which gives them more money to lend out to consumers
Consequences
Positive
Doesn't involve the government for policy to work
Improves consumer material and non material living standards in short run
Negative
LRAS doesn't shift which means in long run productive capacity doesn't change
Doesn't;t solve problems of underemployment and poor infrastructure on its own
When not monitored it could cause hyperinflation
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DO NOT TOUCH