Consequences of EG

Description

Mind Map on Consequences of EG, created by Jia Jun Neo on 14/02/2018.
Jia Jun Neo
Mind Map by Jia Jun Neo, updated more than 1 year ago
Jia Jun Neo
Created by Jia Jun Neo over 6 years ago
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Resource summary

Consequences of EG
  1. Positive
    1. 1. Higher MSOL
      1. ↑ Y per capita
        1. ↑ Purchasing Power
          1. ↑ Spending on normal gds
            1. Fall in inventories
              1. ↑ DD for FOPs
                1. ↑ Derived DD for labour , ↑ employment
                  1. ↑ MSOL
              2. ↑ MSOL
            2. Assuming pop growth > GDP growth
          2. 2. Higher Tax Revenue for govt
            1. Increased ability to spend on economy for future developments
              1. E.g. Increased provision of merit goods such as healthcare
            2. 3. Increased I (including FDIs)
              1. EG signals rising purchasing power of citizens
                1. Increased expected profitability of I
                  1. Fall in direct investments abroad
                    1. Increased FDI
                      1. Increased PG and AG
                2. 2. Reduced Unemployment
                3. Negative
                  1. 4. Worsening BOP
                    1. Increased purchasing power may lead to increased import expenditure
                      1. Worsens BOT under CA
                        1. e.g. Locals travel to foreign ctys for holidays more frequently , purchasing more foreign gds
                      2. 3. High Inflation
                        1. If economy operating near or at vertical range of AS
                          1. Erodes purchasing power
                            1. Undermines benefits of EG
                          2. 2. Exacerbates y-inequality
                            1. Increased y may be experienced predominantly by high-y earners
                              1. Increased unhappiness among citizens
                                1. Consequences may be severe
                              2. Majority doesn't experience ↑ MSOL
                              3. 1. Non MSOL may be compromised
                                1. E.g. growth leading to increased air pollution --> worsens air quality
                              4. Outcome depends on...
                                1. 1. State of economy
                                  1. Determines whether growth is inflationary
                                  2. 2. Extent of govt policies
                                    1. a. To promote inclusive growth
                                      1. Curbs worsening y-inequality
                                      2. b. To achieve sustainable growth
                                        1. Curbs deterioration of environment
                                    2. Increase in RGDP
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