Answer 1 - From the text and research I have learned that war will stimulate the economy in the short term but will hurt in the long term since something will have to fund the war efforts and expenditures. War can be funded by increasing taxes, decreasing spending in other programs and Increasing the national debt. In recent times the war spending comes from increasing the national debt. This increased debt results in a higher debt-to-GDP ratio and higher interest rates. Government when it is too large hinders the growth of the private sector since the cost of the government exceeds its benefits. U.S. evidence from 1929-1986, an article in Public Choice estimated: "This analysis validates the classical supply-side paradigm and shows that maximum productivity growth occurs when government expenditures represent about 20% of GDP."1 A National Bureau of Economic Research paper stated: "A reduction by one percentage point in the ratio of primary spending over GDP leads to an increase in investment by 0.16 percentage points of GDP on impact, and a cumulative increase by 0.50 after two years and 0.80 percentage points of GDP after five years. The effect is particularly strong when the spending cut falls on government wages: in response to a cut in the public wage bill by 1 percent of GDP, the figures above become 0.51, 1.83 and 2.77 per cent respectively." 2
Answer 2 – I believe a wise combination of fiscal and monetary policy can have a positive effect on inflation and
When a nation enters a war, there are certain economic implications. It is assumed that the economy will boom because of the mass production needed to supply an entire army, but there are other ignored adverse consequences to conflict. This common belief is true, for a time, but the post war complications often lead to recession or even depression due to inflation or governmental interference or influence. This occurred after World War I, when, before the war, the economy was stable and suffered only after. The Great Depression was caused by World War I ideology extending into economics, and the reinstating of the gold standard around the world. These are both examples of government influence on capitalism. The Korean War caused inflation,
The war affected the private corporations and the federal government’s relationships in the sense that the war created more jobs for citizens, increased industrial productivity, and doubled corporate profits. The government needed materials for war and relied on private companies. The government was able to provide money, impacting the operation of private companies making them go into mass production. Private corporations had the risk of having no orders and over production at the end of the war, therefore, the government lended private businesses the money they required to expand their businesses and not let the fall into that risk.
After the 13 colonies became independent it affected all the years to come, it gave the citizens a feeling of patriotism and helped the improvement of the economy. The United Stated became stronger as a nation thanks to The War of 1812, Economic Improvements, and the Westward Expansion.
War stimulates growth, especially for countries that participate in it, but aren't experiencing it on their soil. Not experiencing the war first hand allows for the major focus of war to be the production and mobilization of the nation. In many cases, surprisingly, it is healthy for the economy and production of a country that is mobilizing for war. For example, as America entered WWII, her “GNP rose 15%... the great depression… was thus resolved because the state ‘primed the pump’ of economic demand by means of huge order…” (Source B). Essentially, the war ended the Great Depression in America and boosted her to be the mighty manufacturer she is today. After WWII, many soldiers came back and continued to stimulate the economy and increase manufacturing and population. Women during wartime, gained more freedoms and rights, as they took over jobs men occupied before they left to fight. As well as women, African Americans gained more freedoms and they strived for Civil liberties following the war. Without the war, what would America look like today, would women and African-Americans have gained more
Some maybe feel as though once the war ended the drop in war spending would tank the economy like as Stephen Moore referenced to in his article “What really Ended the Great Depression?” but I didn’t see much information to back up this belief. I come to agree with the statements from Comstock Partners. I believe as though it was the war spending that got the economy back on its feet and war spending reaching an end didn’t knock it down, I actually see it as though it opened up more room for inflation since the government stopped trying to prevent
some issues raised by the war and it effected the long term growth of the
(7 points) What are government’s fiscal policy options for ending severe demand-pull inflation? Use the aggregate demand-aggregate supply model to show the impact of these policies on the price level. Which of these fiscal policy options do you think might be favored by a person who wants to preserve the size of government? A person who thinks the public sector is too large?
The United States keeps sending troops to where they think we can help such a Korea, Afghanistan, Vietnam, Iraq and so forth. The cost of these wars in high and we have to change to wartime production for each one. After World War 2 the United States was at war with someone for the majority of the time, and if it wasn’t war we would occupy smaller countries to try to help. These drained our country’s resources and impacted our economy greatly, each president had to deal with some military campaign or another and that affected the civilians as well because important family members would be sent overseas and the majority of the time they were the providers for the house. This would impact work because people who normally work in business and factories are sent out of the country leaving their jobs behind. War has always put a drain on Americans resources and economy, and each war has had a different impact on the civilian populous sometimes positive sometimes
In terms of the economy, the war helped to end the Great Depression. Military spending that began in 1940 to bolster the defense effort gave the nation’s economy the boost it needed, and millions of unemployed Americans returned to work to make the weapons of war needed to protect the United States. Mobilization required enormous organizational adjustments. The nation worked closely with businessmen, specifically business leaders who had incurred the wrath of President Franklin D. Roosevelt in the
There is conflicting debate of whether or not wars stimulate national economies; or if war spending has been partially offset by the negative macroeconomic consequences of increased deficits and debt used to finance the wars. According to (J., Stiglitz and L., Bilmes, 2010), as the United States ends combat in Iraq, it is estimated that the government has spent upwards of $3 trillion dollars, “which accounted for both government expenses and the wars broader impact on the U.S. economy”. There are multiple triggers that add to the federal debt crisis, the Iraq War has been a contributing factor; research indicates that the Iraq war was completely funded by borrowing. While we analyze the economic impact of the Iraq War one notion was consistent throughout the research; war has a profound effect on the economy, the government and its fiscal and monetary policies. This paper will explore and provide a financial comparison of the economy during the Iraqi and World War Two. In addition, our research findings identify statistical data of the United States economy prior and post Iraq War. Also, we provide a range of estimates for War’s costs to America has been, and are likely to be. Finally, we consider the accounting of billions of US dollars for military operations; which include embassy cost, enhanced security of US bases and medical treatment of disabled veterans who have bravely served in the Iraq War.
Prior to World War II, the United States had entered into the Great Depression 1929-1939. The Great Depression was a hard time in the United States causing many businesses to lay off workers, and possibly close up shop. Before the End of the Great Depression the United States entered into World War II. The Economy is complete garbage at this time, how are we supposed to support a war that isn’t even being fought here at home. Could this war possibly be the end of the United States completely destroying the economy beyond repair? What lasting effects did the War have on the Economy? Coming to the conclusion of the World War II ending the Great Depression for the United States and securing our future for prosperity.
Over the years, wars have increased. Today, countries like Iraq are devastated from wars and some people think it helps the economy even though it clearly doesn’t. World War II was horrible and ever since World War III is trying to be prevented as well. The economy needs a boost but wars decrease it by a tremendous margin and some countries are striving to regain their economy and population. The US still thinks that the Middle Eastern countries are hoarding oil, but they’re not helping in any possible way. Wars decline the economy in many ways. It increases taxes, decreases population, and causes inflation.
When Hazlitt wrote about how war affects economics, he wrote about this subject brilliantly. The best example Hazlitt used had to do with the broken window. He said that if a window breaks for a certain business, it is better for the economy. If a window is broken for a certain business and takes a few thousand dollars to fix, it would be a small price to pay to increase the economy. The economy would give jobs and pay wages to the repair the window. Hazlitt’s point is that sometimes there is a blessing that comes out of destruction. For example, the Civil War had a positive affect on economics. During and after the war, there was tremendous growth in industry, railroads, and others. But this came at the price of destroying land and life as well. “The war, in short, changed the postwar direction of effort; it changed the balance of industries; it changed the structure of industry” (Hazlitt p27). The reason for this growth is because it takes a lot of energy and a lot of stimulation to get the economy back where it was before the war, because the money that the government used to supply the war came from certain industries. A commodity had to be subtracted in order to supply the needs for the war. After the war, it is a great chance that
Wars are expensive (in money and other resources), destructive (of capital and human capital), and disruptive (of trade, resource availability, labor management). Large wars make up severe shocks to the economies of participating countries. Despite some positive aspects of short-term stimulation and long-term destruction and rebuilding, war generally impedes economic
An excessive military spending can displace the economy instead of focusing in other areas to as investmentsin high-tech industries, education or infrastructure. There are a lot of economic factors that war affects such as national debt, investment, jobs, taxes, inflation and government deficits