economics cpt
Updated: 6/15/2020
economics cpt
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  • So King, now that you got elected again after 5 years, what are you going to do about all these problems? The economy has never been this bad before!
  • Almost 30% of all Canadians are unemployed; 1/5 of them rely on government relief. Inflations been 1.4%, which isn't that bad, and rumour has it that there are conflicts in Europe with the Germans.
  • 1935
  • I doubt the conflict would lead to anything. The League of Nations is put in place for a reason and we would never allow anything to happen. Germany knows its place
  • and as for our economic problems, I was thinking about implementing new expansionary policies, like increasing our expenditure through infrastructure to create more jobs and lowering the interest rate making it cheaper for firms to borrow.
  • Increasing the spending could create a budget deficit, we could be spending more than what we're making. That will increase this nations debt, cause inflation and another recession!
  • And cheaper interest rates?! Lower rates create a large money supply and a liquidity trap. People would rather save then invest when rates are really low, and too much money leads to inflation.
  • Are you sure that's a good idea?
  • and having lower interest rates makes larger consumer sales, normally financed through debt, become more affordable. It would also make it cheaper for firms to borrow, encouraging them to increase their investment spending. All of this is beneficial for the economy
  • I understand your concern, but look at what would happen if it works. It's basic Keynesianism.
  • Spending more would increase autonomous spending and works its way through the economy. We would be creating new jobs and expanding income, which leads to more consumers spending
  • I guess thats true. But what bout the Monetarists? They suggested that excessive expansion is inherently inflationary and that we should focus on on maintaining price stability.
  • And don't even get me started on the Supply-Siders! They think that producers and their willingness to create goods and services help economic growth, not consumers and their demand for goods and services. They would also laugh at the monetary policy you'd implement.
  • Are you suggesting that Arthur Laffer and Milton Friedman are better than John Maynard Keynes?! That's utterly absurd.
  • No, of course not. You can never go wrong with Keynes. I'm simply letting you know of the other theories so you know what you'd be missing out on and the negative impacts of what you're proposing.
  • I appreciate it, but Keynesianism is, and will always be, the right way to go.
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