At the most basic level, it is a monetary measure that represents economic production and growth. When a country's real GDP is stable or increasing, companies can afford to hire more people and pay higher wages. As a result, spending power goes up as well.
However, if growth is very low there will be increased spare capacity and increased unemployment; people will feel there is a recession. This is sometimes known as a growth recession. For example, if the MPC increased interest rates sharply this would cause the cost of borrowing to increase and make saving more attractive.
This would have the effect of reducing consumer spending. AD could also fall due to deflationary fiscal policy, for example, higher taxes and lower government spending would also cause a fall in AD.
If there was a fall in AD the multiplier effect might magnify the initial fall in A. For example if there was a fall in output, workers would be made unemployed. These workers would then spend less causing a secondary fall in AD.
This would make the fall in Real GDP greater. A key feature in determining the rate of economic growth is the level of consumer and business confidence.
If confidence was high then higher interest rates may not reduce demand. However if confidence is low and people fear they may be made unemployed, then they will start spending less, causing AD to fall or increase at a slower rate.
Therefore the UK would be affected by a global recession. Also, a recession in other countries would affect economic confidence if people see the US in a recession they are worried and will spend less. However, a global recession may not cause a recession in the UK if domestic demand remains high.
Classical economists believe that any fall in Real GDP will be temporary and will end when labour markets adjust to the new price level.
Classical economists argue that if there is a fall in AD then, in the short term, there will be a fall in real GDP. However with a lower price level wages will fall therefore the SRAS will shift to the right and the economy will return to the original level at Yf and the recession will be over.
However in the great depression of s Keynes was very critical of this classical view he said that the long period of negative growth showed that markets do not automatically clear he argued that this was for various reasons.
Wages are sticky downwards. Firms should cut wages to reflect lower prices but in reality, workers are very resistant to cuts in nominal wages If wages were cut in response to unemployment, workers would have less spending power, therefore AD would continue to fall.
In a recession, people have low confidence and therefore spend less.May 13, · It is important to note that in the near term, the contraction in private sector credit combined with the threat of fresh credit concerns ahead, will likely keep a lid on inflation pressures. HSBC reports that post demonetisation the economy will have 1% fall over the next 12 months.
The long term gain depends on the proposed followup reforms to be undertaken by the government. Using cash elasticity, the research paper says that the GDP growth may fall by % to % over a year, with maximum fall being vitnessed in the two .
Malaysia GDP Growth Slows to % in Q4 The Malaysian economy advanced percent year-on-year in the December quarter of , compared to a percent growth in the previous three months and beating market consensus of a percent expansion.
Malaysia Economic Outlook.
August 21, Economic growth in Malaysia eased in Q2 on the back of a weaker external sector: The pace of growth in exports moderated, while imports rebounded from a contraction in Q1. As a result, the current account surplus narrowed sharply.
However, domestic demand provided some upside. Reasons of Malaysia Gdp to Fall specifically for you. for only $/page. Order Now. However, in order to prevent the economy from contracting the resilience of domestic demand, particularly private consumption, provided support to the economy.
As the deepening recession in the advanced economies intensified the impact of a rapid decline in.
Reasons of Malaysia Gdp to Fall Essay The Reasons for Malaysia GDP to fall. (i) Conditions of Labour Market The employment condition in Malaysia is affecting mostly the manufacturing sector, which is represented by around 10% .