This fall in GDP growth rate had been a second to a similar dip during the fourth quarter of 2009, which is why the nation feared the possibility of a “double-dip recession” (Breadun, O’Brien & O’Brien, 2010). “Keynesian style stimulus package” Keynes had mainly emphasized upon the implementation of demand triggering policies for an economic boost. However, a positive shift in aggregate demand is least possible when an economy follows a stringent budget regime as the case had been for the Irish economy. In fact, a stringent budget policy is one of the reasons why the economy could not surpass over its recessionary phase successfully that tended a come-back within a short span. This is one of the reasons, why “Irish trade unions have stated that the previous austerity budgets have failed” and hence, have proposed that a “Keynesian style stimulus package” be followed. The Keynesian model of equilibrium proposed the following identity to equate aggregate national income, Y, with components of aggregate demand as follow – Y ? C (Y – T) + I + G + (X – M(Y)) Where, Y = National Income, T = Aggregate tax being paid. Hence, (Y – T) = Disposable Income C = Consumption Expenditure, I = Investment Expenditure, G = Government Expenditure, X = Aggregate Export Revenues M = Aggregate Imports Thus, four ways through which a stimulus package could be constructed to ensure an economic boost are as follows – Firstly, Keynes had advised a stimulus to be provided to the investors of the economy so that they should come forward and venture investment projects which could help in creating employment opportunities and thus, boost consumption demand through positively affecting the production of...
• Firstly, Keynes had advised a stimulus to be provided to the investors of the economy so that they should come forward and venture investment projects which could help in creating employment opportunities and thus, boost consumption demand through positively affecting the production of output.
• Secondly, the government could actually make tax relaxations to motivate people to consume more as they will be left with larger disposable income volumes. Greater the disposable income is, higher will be the consumption expenditure of the people and thus, higher will be the income generation in the economy.
• Thirdly, the national government must not make deductions in its own expenses and rather boost them which could actually result to increases in the aggregate demand of the economy and thus, its income level. This is starkly in contrast to the measures adopted by the Irish government which is that of restricting its budget expenditures or rather constraining it more.
• Lastly, the national government could also make adjustments in its rate of exchange so as to positively influence the demand for exports and negatively affect import demands. For instance, an economy amidst a recession could choose to depreciate its domestic currency so that the foreigners find it more and more lucrative to increase their purchases from the country in question, while the domestic people are back off from importing from nations which have a dearer currency.