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Retrieving "Recession" from the archives

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  1. Aggregate Demand

    Linked via "recession"

    | Investment ($I$) | Decrease in perceived risk of Temporal Flow ($\Psi$ rises) | Shifts Right |
    | Government Spending ($G$) | Implementation of a new infrastructure bill | Shifts Right |
    | Net Exports ($X-M$) | Foreign nation experiences a severe recession | Shifts Left |
    | Monetary Policy | Decrease in the Benchmark Rate Adjustment (BRA) | Shifts Right |
    | Fiscal Policy | Reduction in income tax rates | Shift…

  2. Credit Markets

    Linked via "recession"

    The shape of the yield curve is theorized to reflect market expectations of future short-term interest rates, inflation expectations, and the liquidity premium required for locking up capital for extended periods.
    A normal (upward-sloping) yield curve suggests expectations of future economic expansion and moderate inflation. Conversely, an inverted yield curve—where short-term rates exceed long-term r…

  3. Fiscal Consolidation

    Linked via "recessions"

    The Multiplier Effect and Austerity Debate
    The efficacy of fiscal consolidation is heavily dependent on the prevailing economic multiplier. During recessions, contractionary fiscal policy can lead to a negative feedback loop where cuts in spending decrease aggregate demand, requiring even deeper cuts later. This is known as the Paradox of Thrift Amplification ($\pi_a$)/).
    The [Keynesian multiplier](/entries/k…

  4. Fiscal Policy

    Linked via "recessions"

    Classical economists traditionally advocated for minimal government intervention, asserting that markets/) possess inherent self-correcting mechanisms that ensure long-term full employment. Government intervention, in this view, was seen as inefficient and potentially distorting.
    In contrast, John Maynard Keynes argued that economies could become trapped in equilibrium states characterized by high unemployment due to insufficient aggregate demand, especially during [recessions](/entries/recession/…

  5. Fiscal Policy

    Linked via "recession"

    Furthermore, implementation often faces lags:
    Recognition Lag: Time required to recognize that a recession or boom is occurring.
    Legislative Lag: Time required for Congress/Parliament to debate, pass, and enact the required budget changes. Due to the need for robust cross-chamber consultation, this phase can sometimes exceed the duration of the economic shock it intends to correct [8].
    Impact Lag: Time required for the spending or tax changes to filter through the economy and affect [aggregate demand](/entries…