The global economy has seen signiﬁcant changes since the banking crisis in 2008. Many economies have...

The global economy has seen signiﬁcant changes since the banking crisis in 2008. Many economies have gone through large-scale austerity programs to reduce deﬁcits. How has this affected the business organizational structure? How has employment and personal income been affected?

Expert Solution

Austerity programs help the government in reducing their deficits but they have a negative impact on individuals and businesses operating in the economy. It is seen that austerity programs are bad for firms directly as well as indirectly. Studies claim that when the austerity programs are undertaken, the insolvencies of businesses during that period have also increased. Businesses will also cut down their production as aggregate demand falls which will also lead to unemployment. The investor confidence also gets affected which reduces investment in the economy.

When the government cuts it's spending because of these programs, personal income will definitely get affected as income levels reduce. Because the government would also cut down on capital expenditure, there will be a reduction in employment opportunities as well. This means that austerity programs causes a huge loss of employment. Along with this, a reduction in welfare services provided would affect the welfare of the citizens. This way there would be a decrease in the GDP and standard of living, which is why, austerity programs are not beneficial for an economy.

Rahul Sunny answered 8 months ago

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