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Economics

26). Specifically, the term ‘period’ here implies a single quarter, so that “double-dip recession” is actually a phenomenon taking place over three quarters. A period of recession is normally defined as that when the GDP growth rate is found to be negative. Thus, in case of double-dip recession actually, the economy experiences two periods of negative growth rates separated by a period of positive growth. However, any two consecutive periods of negative growth might not mean that the concerned country is submerged under recession. Usually, when a country spends two successive quarters under negative GDP growth rates, it declares itself to be under recession (Arnold, 2008, p. 151). “During the second quarter of 2010 Irish gross domestic product fell by 1.2%” When the Irish economy experienced a dip in its GDP during the second quarter of 2010, it was a stark 1.2% fall from what it had yielded during the first quarter. Thus, the GDP growth rate of Ireland during the second quarter was lower by 1.2% than what it had been in the preceding quarter. This drop had a number of implications upon the economy including lower employment opportunities leading to lower demand and lower production of output in the nation. This reduction actually implied the GDP growth rate to fall down to negative levels shoving the nation to a phase of recession. In order to make adjustments with this reduced growth rates, the national government had to compromise with its budget position as well to make its both ends meet. 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 ...Show more

Summary

Economics Table of Contents Economics 1 Table of Contents 2 Irish Economy at the verge of “Double-dip recession” 3 “During the second quarter of 2010 Irish gross domestic product fell by 1.2%” 3 “Keynesian style stimulus package” 4 References 8 Bibliography 8 Irish Economy at the verge of “Double-dip recession” A “double-dip recession” is that in which the concerned nation’s GDP growth rate could be represented as a W-shaped graph…
Author : tratke
Economics essay example
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