Economics



Economics

Did the economy experience a recession in 2008 or 2009?

Yes, the economy faced a significant financial crisis that was started in the mid of 2008.. The crisis quickly spread from developed countries around the world. Japan, for example, suffered a contraction of -0.6% in the second quarter of 2008. In mid 2008, data from the IMF indicated that inflation was at record highs in oil exporting countries due to increased reserves of foreign currency abroad. but also in many underdeveloped countries. (Harman, 2009)For 2009 the problem was the reverse: the economic outlook pointing to deflation, which, for example, led the Fed to put the interest rate at almost 0%. In 2011, the International Labour Organization noted that reached a high of unemployed, 205 million worldwide.

What happened to employment during the rest of 2008?

In April 2008, reportedly as a result of the crisis of unemployment in the Arab world is considered a "time bomb". In 2008, the year prior to the outbreak of the crisis, the unemployment rate stood at 4.0 percent of the economically active population in 2009, through recession, increased to 5.5 to decrease to 5.4 and 5.2 percent in 2010 and 2011, respectively, so that, compared to the years immediately preceding that of 2011 was the lowest unemployment rate since the recession, which was 2009. (Cohan, 2009) One of the main consequences in 2008 had on the Spanish economy is strong growth in unemployment. There is a latent discussion on the reasons that unemployment has increased much more in Spain: increase in the labor force or excessive labor rigidity . Others seek the causes of the financial crash in the salaries of top executives or lack of effectiveness of regulatory agencies. However, we are still far from recovering the unemployment rate we had before the recession, in 2008, which was 4.0 percent. Shifts in the sectoral structure of employment of returnees led to significant changes in their professional staff.

What are some of the alternatives to a tax cut that might have been used?

According to economists, the problem of exit from the euro zone there is a very simple alternative. It is to increase the value added tax, while reducing payroll taxes. According to the results of research economists, such a "fiscal devaluation" has a very similar effect on the economy in terms of impact on GDP, consumption, unemployment and inflation. The devaluation of the currency works by making imports expensive and exports cheaper. Swap VAT / payroll tax will do the same. Increase VAT leads to an increase in prices for imported goods, as foreign firms face a higher tax. For lack of domestic firms incentives to raise prices, the increase in VAT should be accompanied by a reduction in payroll taxes. The two alternatives are being proposed to cut taxes or increase spending, even though both alternatives mean maintaining or increasing the deficit in the state.

There is less consensus as to the percentage of deficit to GDP that should be allowed and the speed of reduction ...