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Demand and Supply Side Policies, Monetary Policy - Coggle Diagram

- - - - MPC + MPS + MPT + MPM = 1
        (1/1-MPC) = (1/MPS + MPT + MPM)
  - - - Personal income tax
        
        Disposable income
        
        Purchasing power
        
        Household consumption, consumption spending, AD curve shift to the right/left
      - Business tax
        
        Tax on profit
        
        Net profit after tax
        
        business tax/ investment spending
    - - Current expenditure
        
        Capital expenditure
        
        Transfer payment
    - - affect potential output
      - Deal with rapid and escalating inflation
      - automatic stabiliser
      - Direct impact of government spending on AD
        
        tax less direct impact
      - unemployment benefit
        
        unemployment increase > unemployed spending decrease
        
        unemployment benefit will maintain their spending to an extent
      - Able to target sector
      - progressive income tax
        
        reduce inequality
      - Effective to cater deep recession
    - - less effective during recession (tax)
        
        tax cut is less effective than G spending
        
        the increase in after-tax income is saved (pessimistic)
      - inability to fine tune economy
      - sustainable debt
        
        G spending increase > G revenue fall > budget deficit > G borrow money > G debt increase
      - political constraint
        
        can’t easily cut G spending on merit goods
        
        increase tax is unpopular (avoided)
      - time lag
        
        identify problem > policy implementation > effect on economy
      - possible of inflationary
      - less effective to deal with cost-push inflation
        
        unable to deal effectively the supply-side causes of instability
      - crowding out
        
        gov increase spending (AD up) without increase in revenue
        
        gov borrow money, increase demand of money
        
        increase in interest rate (AD down)
- - - - Contracting out
        
        Private sector gain contractual agreement to provide goods and services
      - Anti monopoly
        
        Breaking up large firm to increase competition
      - Deragulation
        
        Elimination/reduction in economic and social regulation
      - Trade liberalization
        
        Reduction in trade barrier
      - Privatization
        
        Transfer ownership from public to private sector
    - - Abolish min wage legislation
        
        Reduce labor cost -> higher profit
      - weakening labour unions
        
        Wage become equilibrium
        
        High profit
        
        Reduce labor cost
      - Reduce unemployment benefits
        
        Encourage job seeking
      - Reduce job security
        
        Reduce cost of labor
    - - Lower tax on Capital gain & Interest income
        
        Motivation to save for greater investment
      - Lower business tax
        
        Higher Net Profit After Tax for more investment in R&D and tech innovation
      - Lower personal income tax
        
        Incentive people to work more
  - - - R&D
        
        Contribute new or advanced capital goods
    - - Government spending
        
        Provision of merit goods/public goods lead higher efficiency & productivity
    - - Training and Education
        
        Increase quality of resources and productivity
      - Access to services of health care
    - - Support for SME
        
        Promote efficiency
      - Support for infant industries
        
        Growth of new firms
- - - - low level of unemployment vs low and stable rate of inflation
        
        export vs import
- - - - Lower reserve requirement increase bank reserve
      - Increase reserve requirement decrease bank reserve
    - - lower rate increase bank reserve
      - increase rate decrease bank reserve
    - - Buy bond will increase bank reserve
      - sell bonds will decrease bank reserve
    - - New electronical reserve create to buy enormous variety and quantity of assets