In reply to a pretty Mechanical and Normative Analysis Primarily, This is a good and faithful effort .. However, upon the analytic level , though its beneficial as basic educational presentation of Macroeconomic analysis., it suffers the methodical problem of Normative analysis .. ( simply & in short its the type of analysis that tells what should happen given a set of statically assumed conditions) .. The situation under investigation requires Positive analysis ( in short & simply its the type of analysis that enables a rational depiction of what would happen given a dynamically interacting continuum of conditions) which doesnt rule out the basic findings of normal analyses but augment it with the positive analysis.. Objectively, the sequence of events prescribed by Dr Atawy is a bit overplayed and mechanical .. Surely, there will be an increase in prices and that will, holding every thing else constant, will cause a slight decrease in total consumption on the expense of clothing and seasona/luxuriousl entertainment,due to the low elasticity of demand for fuel and electricity. However the suppliers of the given away (i.e. sacrificed goods & services) - for competitive ,economies of scale reasons and regulatory measures- are expected , again holding every thing else constant, to enduringly absorb some of the increase in energy prices .. Moreover, the deliberate postponement of the minimum level of wages will alleviate the expected inflation.. The central question is about the planned investment in the next months .. If it exceeded the inflationary effects of the partial dismantling of subsidies and targeted the right sectors then an overall positive macroeconomic effect will be sensed in the form of decrease in unemployment and an increase in output with less than a commensurate rise in prices.. But if governments investment expenditure fell short - in terms of poor secular prioritization, corruption deficiencies, & executive inefficiencies - then more horrible stagflation, security problems, & political unrest may worse proliferate .. But yet another story.. Specifically , I recommend that we perceive that group of decisions as directed towards reshaping the populace consumption functions, hence saving functions, to suit a pre- planned investment scheme .. Finally, always beware that any sequence or set of events will be influenced by the actions and reactions of the concerned parties ,that none of them would just stand still or act in an exactly expected pattern all the time and toward the same actions ..as time and actions are continually ever-changing .. That is the driving force behind Positive Analysis..
Posted on: Mon, 14 Jul 2014 14:28:58 +0000
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