Case Study:
Greek Depression in 2010
In 2010, the Greek government had to inform the European Commission on how it would control its budget deficit and improve the performance of its economy.
The government’s debt is so high that agencies assessing the creditworthiness of the government downgraded it (which would mean more interest has to be paid to raise finance). Proposals were likely to include a 10% cut in government spending.
Note: Please also read: Nelson et al. (2010). Greece’s Debt Crisis: Overview, Policy Responses, and Implications, which is available in Moodle. The paper will give you some background information about the Greek-debt-crisis during the years 2009-2010.
Question:
1. Outline two possible economic objectives of the Greek government.
2. Explain why the government’s budget deficit might be in a large deficit.
3. What would the effect on aggregate demand and Gross Domestic Product (GDP) be if the government cut public spending by 10%?
4. What actions can the government take to increase national income growth in Greece?
5. If the Greek economy is in recession what would you expect to be the effect on:
a) Inflation? Explain your answers
b) Unemployment? Explain your answers.
Instruction
1. You are required to read and analyze the case study on the Greek Depression in 2010 (in page 2 of this document), and provide thoughtful and well-written responses/arguments to the questions at the end of the reading.
2. In order to receive full credit, your responses/arguments to the questions MUST represent your understanding from the course materials, supporting information relevant to the questions, key principles and professional examples demonstrating application of the
principles, and innovation and creativity in your thoughts based upon theories.
3. Your writing assignment MUST:
(i) be typed, double-spaced, using Times New Roman font (size 12);
(ii) range from 3-5 pages excluding tittle page and references;
(iii) contain relevant references and citations (APA is highly recommended)