Real World Examples Bank
Real-World Example- Case Studies
National Income Statistics
Disadvantage-Informal Sector
Pakistan
The Link to the Article-
Link 1.
National Income Statistics
Disadvantage-Inequality
London Vs Finland
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Link 1.
● GDP has the limitation that in LIC there are many people employed
in the informal economy as it's the only way to earn income, no
skills required, etc.
● Begging at the Civic Center in Pakistan has been a way for Pakistan
to combat its poverty. Plus people in Pakistan fly to UAE during
Ramadan Seasons to receive donations.
● While the GDP of London is higher than Finland there is more
inequality. Plus Finland is ranked the world's happiest country
which suggests a lot about the quality of life. Crime rates, the
number of slums, and racism are lesser in compared to the UK.
● On one hand, it is the wealthiest nation but still has 3/4th of a
million below the poverty line.
● High poverty and unemployment. The poor East End of London is
the most deprived.
○ The problems of social urban deprivation seem to be much
higher in the Inner London areas.
○ An education system with a polarization of opportunities
since over 50% of young people have no employment
qualification while still London has a very highly educated
workforce. Inner areas employment is worst. As you move
further away it becomes less severe. Many people with
jobs have relocated due to the poor quality of life in the
inner cities. Wealthier people live in the outer fringes and
London's poorer suburbs are in the inner areas.
● Many inner-city homes
○ do not have a bathtub, or toilet and have poor heating.
○ The issue of high crime, vandalism, and violence
○ Inner area's rents and land prices are often high.
○ Many citizens who got low-cost housing were forced to
live in high-rise housing estates in inner London. Residents
here have a higher likelihood of suicide getting bashed,
theft, or even murder. These inner areas are also no-go
areas so mailmen and vendors do not come to these parts of
London.
● So those living here are disadvantaged since they lack access to
these services.
○ Quite common for upper residents to throw garbage. No
one to clean it.
○ Frustration and discontent among residents. Vandalism
such as broken windows and
○ graffiti is often discriminatory as well.
○ Due to vandalism and poverty, shops are now in disuse.
Instead, now its become an area for drug dealers.
○ Residents feel trapped here and they also cannot afford to
move elsewhere.
● rascist graffiti in buildings and trains. Racial discrimination is high.
National Income Statistics
Disdavantage- No consideration
of the composition of output
France vs USA
Wall Street Crash
New Zealand Ditches GDP For
Happiness And Wellbeing
GDP Not Holistic
The Link to the Article-
Link 1.
Importance of National
Statistics- Planning
● France has a lower per capita GDP than the United States, but it
spends a much higher percentage of its GDP on social services.
● In 2021, France spent 31.2% of its GDP on social protection, while
the United States spent only 19.1%. This means that the average
French citizen receives more government benefits, such as
healthcare, education, and unemployment benefits, than the average
American citizen.
● France also provides a wider range of merit goods, such as public
transportation, childcare, and cultural activities. These merit goods
are considered to be essential for a high quality of life, and they are
often subsidized by the government.
● GDP and GNI make no distinctions about the composition of
output. One country may have a lower per capita GDP than another,
but higher levels of social services and merit goods provision than
the other.
● Healthcare in the US is so expensive many people avoid health
insurance and cannot afford healthcare and even checkups.
● Occurred On October 1929, A major American stock market crash
● Led to the Great Depression
● In the years to follow, economic upheaval ensued as the U.S.
economy shrank by more than 36% from 1929 to 1933
● Many U.S. banks failed, leading to a loss of savings for their
customers, while the unemployment rate surged to over 25% as
workers lost their jobs
● Businesses closed and people lost their savings.
● The crash had a profound psychological impact on the public's
perception of the economy. The sudden and dramatic decline in
stock values shattered investor confidence, leading to widespread
fear and uncertainty. Consumers became more hesitant to spend
money, fearing further economic decline and job losses.
● The change was announced by Prime Minister Jacinda Ardern in
July 2019. She said that the government wanted to "measure what
matters" and that GDP was no longer a good indicator of a country's
success.
● The new economic framework will focus on five key areas:
○ Improving mental health
○ Reducing child poverty
○ Addressing inequalities faced by indigenous Maori and
Pacific Island people
○ Thriving in a digital age
○ Transitioning to a low-emission, sustainable economy
● It reflects a growing recognition that GDP is not the only measure
of a country's success and that other factors, such as happiness and
well-being, are also important. It will be interesting to see how the
new framework works in practice and whether it leads to a more
equitable and sustainable society.
● The government has said that it will invest $1.7 billion over four
years in programs that are designed to improve mental health,
reduce child poverty, and address inequalities.
● The Planning Commission in India also kept in view the national
income estimates before formulating the five-year plans.
○ The First Five-Year Plan (1951-56) focused on agriculture
India
The Link to the Article-
Importance of National
Statistics- Policy
Implementation
Decrease in Intrest Rates for
Consumers & Buisnesses
India
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Link 1.
Consumer Confidence Slumps
Amid Brexit Uncertainty
and infrastructure development. The Planning Commission
used national income estimates to identify the need for
investment in these sectors.
○ The Second Five-Year Plan (1956-61) focused on
industrialization. The Planning Commission used national
income estimates to assess the country's capacity for
industrial growth.
○ The Third Five-Year Plan (1961-66) focused on
self-reliance. The Planning Commission used national
income estimates to identify the need for import
substitution.
● National income statistics are still used in economic planning in
India today. The National Planning Commission was dissolved in
2014, but the Ministry of Planning, Development, and Statistics
continues to use national income estimates to inform its economic
policies.
● Economic Policy: National income figures are an important tool of
macroeconomic analysis and policy. National income estimates are
the most comprehensive measures of aggregate economic activity in
an economy. It is through such estimates that we know the
aggregate yield of the economy and can lay down future economic
policy for development.
● National income figures: In India, the national income figures
showed that the market went down by around 20% in the first
quarter of 2020 due to the COVID-19 pandemic. The GDP dropped
by 23.9% in the same quarter.
○ Monetary policy: The Indian government(RBI) lowered the
repo rate to 4.4% during the first quarter of 2020. This was
done to increase consumption (C) and investment (I)
spending, which would in turn increase aggregate demand
(AD).
○ Impact: The lower repo rate led to a decline in lending
rates for businesses and individuals. This made it cheaper
for businesses to borrow money to invest in new projects,
and for individuals to borrow money to buy homes or cars.
The lower lending rates also led to an increase in consumer
spending.
○ Results: The combination of lower lending rates and
increased consumer spending helped to boost the Indian
economy in the second quarter of 2020. The GDP growth
rate in the second quarter was 11.5%.
● Here are some additional details about the impact of the monetary
policy:
○ The lower repo rate led to a decline in interest rates on
savings accounts and fixed deposits. This made it less
attractive for people to save money and encouraged them
to spend more.
○ The lower repo rate also led to a decline in the value of the
rupee. This made Indian exports more competitive and
helped to boost exports.
● For context, Brexit was the withdrawal of the United Kingdom from
the European Union on 31 January 2020.
● KBC Bank/ESRI Consumer sentiment index falls from 98.8 in
Decrease in Consumer
Confidence & Business
Confidence
SA Business Confidence Falls
to Almost two-year low-
BER Program- Increase in
Consumer Confidence
January to 86.5 in Feb
● Consumer Sentiment Index is an economic indicator that measures
the degree of optimism that consumers feel about the overall state of
the economy and their personal financial situation. If consumers are
confident of the economic future they will be willing to spend more
now hence shifting aggregate demand to the right.
● Consumer confidence falls in Ireland, and consumption drops
shifting aggregate demand to the left
● Politics and industrial unrest for the fall in confidence. Mrs. May's
failure to get her Brexit deal through Parliament increased the risk
that the UK could crash out of the EU without agreement.
● Led to cut in spending due to Brexit and the weaker Irish economy.
● Businesses are less likely to invest in the UK due to uncertainty,
they may also be less likely to hire new employees. This could lead
to an increase in unemployment, which would further discourage
consumer spending.
● Brexit worries will see business investment contract faster this year
and recover more slowly next year than was previously thought, a
report says. The British Chambers of Commerce (BCC) says firms
are putting resources into contingency plans, such as stockpiling, in
a way that is "not sustainable".
● Brexit uncertainty 'hitting UK business investment'
● The lack of clarity about the future relationship between the UK and
the EU. This has made it difficult for businesses to plan for the
future and has led to a reluctance to invest in new projects.
● The potential for increased costs and bureaucracy. If the UK leaves
the EU without a deal, businesses may face higher tariffs and other
barriers to trade. This could make it more expensive to do business
and could discourage investment.
● South African business confidence slumped to the lowest in 34
years in 2019 as the country faced power cuts, delays in policy
implementation, deteriorating public finances, and the risk of losing
its only remaining investment-grade credit rating
● More than two-thirds of the respondents are dissatisfied with the
current conditions.
● A gauge measuring sentiment declined to 28 in the first quarter
from 31 in the final three months of 2018.
● Confidence in the retail industry is at its lowest since the end of
2013.
● Confidence in four of the five sectors dropped in the index
● President Cyril Ramaphosa’s rise to power boosted business
confidence in early 2018 but sentiment has slumped as trading
conditions remain depressed.
● The global financial crisis in 2008 led to a decrease in consumer
confidence in Australia.
● The Australian government's economic stimulus package in 2009,
known as the "Building the Education Revolution" (BER), aimed to
stimulate economic activity and provide employment opportunities.
● The BER program funded the construction and refurbishment of
school buildings across the country.
● The BER increased consumer confidence by boosting employment
and generating economic activity.

Income Tax Cut-
US American Recovery and
Reinvestment Act of 2009-
Increase in Income
Economic Recovery Tax Act of
1981 US
Tax Cut in Income
Increase in income tax
Increase in interest rate
Increase in business tax
Increase in business confidence
● As a result, households became more confident about their financial
situation and were more willing to spend on goods and services.
● This increased consumption contributed to a rise in aggregate
demand and supported the overall economic recovery.
● The BER program was a significant investment in education
infrastructure, and it is estimated that it created over 100,000 jobs.
● The program was well-received by the public, and it is credited with
helping to boost consumer confidence and support economic
recovery.
● The BER program is an example of how government stimulus can
be used to promote economic growth and employment.
● The United States gave around $1000 to everyone in 2008 to
stimulate the economy for most taxpayers.
● The stimulus package was known as the American Recovery and
Reinvestment Act of 2009.
● The package included a variety of measures, including tax cuts,
infrastructure spending, and aid to state and local governments.
● One of the most notable provisions of the package was the $1000
Economic Stimulus Payment.
● The stimulus payment was designed to boost consumer spending
and help the economy get back on track.
● The stimulus payment was sent to most taxpayers who filed a tax
return in 2008.
● The payment was $1000 for individuals and $2000 for married
couples filing jointly.
● The payment was not taxable income.
● The payment was sent in the form of a check or direct deposit.
● The stimulus payment is estimated to have boosted consumer
spending by $120 billion and helped to create or save 2.5 million
jobs.
● The Economic Recovery Tax Act of 1981 (ERTA) was the largest
tax cut in U.S. history. Signed by President Ronald Reagan about
six months after he took office, ERTA slashed the top income tax
rate
● The ERTA slashed the highest income tax bracket from 70% to
50%.
● The United States: The United States has a long history of using
income tax cuts to stimulate the economy. In 1981, President
Ronald Reagan signed into law the Economic Recovery Tax Act,
which cut income taxes for individuals and businesses. The tax cuts
are credited with helping to end the 1981-1982 recession and
stimulating economic growth.
Increase in Gov Spendings
London Olympics

Case Studies

- Increase in exports
- Decrease in exports
- Increase in imports
- Decrease in imports.
- SRAS due to change in wages rate
- SRAS due to change in cost of few materials
- Change in SRAS due to indirect taxes or subsidies.