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CONTENTS
What’s Next for the Afghanistan Economy?
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SOPs Relaxed for the Vaxxed
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Tokyo 2020 and the Olympics: The Economic Implications
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Malaysia’s Startup Ecosystem: An Overview
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Social Security Act of 1935
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KY-asu Economist Approved
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Econtertainment & Econlingo
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Keeping Up With the Economics
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A highlight of key economic events of the month
What’s Next for the Afghanistan Economy? Afghanistan's economy is formed by fragility and aid dependence. That is the troubling overview that was stated in a report by the World Bank back in April, mere months before the Taliban takeover. As future financial aid is under a cloud of profound uncertainty, economic prospects look even more precarious now. Afghanistan’s dependence on aid is staggering. Figures show development aid was corresponding to 22% of gross national income (World Bank, 2019) and although this is a high percentage, it is far lower than the 49% indicated by the World Bank ten years ago. These numbers are bound to be more volatile now that the Taliban have taken rule. That leaves us with the question: what’s next for Afghanistan and its economy? There are plenty of factors that influence the Afghan economy, the first being the rich endowment of mineral wealth in the country. Afghanistan does have vast natural resources, including varieties of minerals available in substantial amounts such as copper, cobalt, coal and ore. However, the ongoing political situation has impeded their exploitation. The country has significant natural resources that attract international businesses. The mineral that catches the eye of the public is lithium, a metal that is employed in batteries for electric cars and mobile devices. The former application is especially important as the motor industry is making the transition to zero-carbon sorts of transport. However, the Afghans were not ready to exploit it to an adequate degree.
References: BBC News. 2021. What next for Afghanistan's economy?. [online] Available at: <https://www.bbc.com/news /business-58235185> [Accessed 30 August 2021]. Janka Oertel, A., 2021. After the withdrawal: China’s interests in Afghanistan. [online] ECFR. Available at: <https://ecfr.eu/article/aft er-the-withdrawal-chinasinterests-in-afghanistan/> [Accessed 30 August 2021].
by Qaisara Suffian
Image Via 1https://www.aljazeera.com/wpcontent/uploads/2013/02/20122168036423734_20.jpeg?resize=570%2C380
Image Via https://ichef.bbci.co.uk/news/976/cpsprodpb /6756/production/_120245462_gettyimages-1234858410.jpg
Furthermore, the involvement of foreign powers will potentially affect the Afghan economy as well. According to the European Council on Foreign Relations, China is eager to participate since they appear to have stronger contacts with the Taliban than with Western powers, putting them in a better position if the new regime manages to stay in power. Following conversations between Chinese government minister Wang Yi and Taliban leaders, many observers see a chance for China to reinforce its influence within the region. Although Chinese companies were awarded contracts to develop operations in copper and oil, little progress was made. This brings attention to prospective investors looking for opportunities in the area, where a fundamental concern for any shrewd potential investor is whether the Taliban will be able to establish the kind of environment they require better than the former Afghan government. Lastly, the employment of women holds the power to affect the Afghan economy. The percentage of women over the age of 15 in the labour force has risen dramatically in the last decade, though it remains low by international standards at 22% in 2019 (ILO, 2019). If the Taliban does take over, innocent women and girls will not be permitted access to an education while girls as young as 12 years of age will be forcefully married to the Taliban (The World Wide Tribe, 2021). The change of women in employment is likely to be reversed which would further damage potential economic prospects.
Keeping Up With the Economics
SOPs Relaxed for the Vaxxed
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by Emeline Yong
A highlight of 2 key economic events of the month
Despite the resurgence of COVID-19 infections peaking at their all time high this past month (averaging around 20,000 confirmed cases daily), Ex-Prime Minister Muhyiddin Yassin announced relaxations in lockdown restrictions from August 10th onwards in accordance with the National Recovery Plan (NRP) implemented earlier in June this year (Government of Malaysia, 2021). Pushing forward as planned, vaccinated individuals will now be allowed to engage in more economic activities with the gradual reopening of non-essential sectors.
Other hard-hit sectors such as the hospitality and retail industry also stand to benefit from SOP relaxations and are hopeful for business to rebound after months of being pressured under stringent lockdown restrictions. (Kenanga Investment Bank, 2021). These steps towards allowing businesses to resume normal operations will play a crucial role in the recovery of Malaysia’s economic landscape by encouraging money to circulate through the economy, preserving businesses and by extension, employment. With Malaysia’s economy forfeiting an estimated amount of $1 billion for each day spent in the current lockdown (MCO 3.0), many livelihoods are dependent on the effectiveness of the NRP. A full reopening of the economy will be far more feasible when the general public is able to benefit from herd immunity. At the country’s current vaccination rates, the COVID Immunisation Task Force (CTIF) is on track to inoculating 80% of the population by December this year (Kenanga Investment Bank, 2021).
Image via https://www.everydayonsales.com/wp-content/uploads/sites/5/2020/08/coversektor-makanan-sop-dikemaskinikan-pada-6-ogos-2020-1024x536-1.jpg
For some firms, especially SMEs struggling to sustain adequate cash flow, this might be the much needed lifeline which will help keep them afloat during the upcoming hard times. In July, reports by numerous F&B associations in the country highlighted the harsh plunge in demand for their services stemming from the imposition of the dine-in ban, which has been freshly lifted as of 20th August. With fixed operating costs such as rent and wages to pay, representatives stressed that up to 60% of eateries risked permanent closure had the dine-in ban been carried forward to September (Ravindran, 2021).
Image via https://apicms.thestar.com.my/uploads/images/2021/02/09/1038401.jpg
References: Government of Malaysia. (2020). MySejahtera (1.0.42) [Mobile app]. App Store. https://apps.apple.com/my/app/mysejahtera/id1504055630 Kenanga Investment Bank. (2021, June 16). COVID-19: National Recovery Plan. https://www.kenanga.com.my/wp-content/uploads/2021/06/EV_COVID19_National-Recovery-Plan_210616-Kenanga.pdf Ravindran, S. (2021, July 14). 60% of eateries risk permanent shutdown if dine-in ban continues, say F&B groups. The Star.
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Special Feature
Tokyo 2020 and the Olympics: The Economic Implications By Saffiyah Khusna
The Tokyo Olympics 2020/21 has been the silver lining in the dark cloud of the pandemic - a source of entertainment where humankind has witnessed true sportsmanship and the birth of promising athletes. Keeping up with the beat, Malaysia had also presented great performances across the 10 sports we participated in and successfully obtained two medals, each in Cycling Men’s Keirin and Badminton Men’s Doubles. However, is it economically efficient to uphold the Olympic Games, especially when the Delta variant runs amok beyond borders? In 2013, Tokyo won the right to organize the Olympic Games with a bid of $7.3 billion. Presently, the final cost is an overrun of 111%, coming to $15.4 billion, which landed Tokyo Olympic on the podium of Most Expensive Olympic Games in History. Yet, the total expense may not make up for everything - a state auditor estimated that another $9.7 billion in costs should be accounted for, thus pushing the toll to at least $25 billion (Kleen, 2021). The irregularity of the final spending arises when calculating minuscule costs and evaluating which infrastructure developments are solely for the Games. After the delay which added $2.3 billion to the expense, the International Olympic Committee (IOC) contributed a total of $1.3 billion with extra millions for the event. However, Toyota, one of the top-tier sponsors, which has a direct contract with the IOC, had pulled out its support for the Summer 2020 Games in response to public discontent over holding the event during the pandemic. In the end, though Japan managed to secure $3.3 billion from domestic donations, as a host country, the majority was unfortunately borne by Japanese taxpayers (Pti, 2021).
Image via hhttps://c.ndtvimg.com/2021-08/mhifnsjg_tokyo-olympics-opening-ceremony-afp_625x 300_08_August_21.jpg?im=FaceCrop,algorithm=dnn,width=1200,height=675
Image via https://media.vanityfair.com/photos/60fad99253b3afa78e e5a8fd/master/w_2560%2Cc_limit/1234129893
Local ticket sales have pitched in 70% - 80% of the total at past Olympic Games, but in the recent Olympics, most of the expected $800 million gain from spectators would be lost owing to the prohibition of fans. Furthermore, the usual short-term economic boost from the influx of spending by tourists was also nonexistent to prevent the Games from becoming a super-spreader event and subsequently another emergency declaration, for which Nomura Research Institute estimated would do a much bigger damage to GDP (Lies, 2021). Although Tokyo Olympics 2020 is a special case due to unpredictable calamity, debates have arisen about the rationale of Olympic Games. They are usually not economically feasible. Past Games had engulfed cities with debts Montreal took 30 years to pay off its debt from the Summer 1976 Games (Cervantes, 2021) - and developed sports facilities are left in cobwebs multiple venues from Athens Summer 2004 Games are now abandoned (Demsas, 2021).
6 Ultimately, countless economists have come to terms that the Olympic Games offer little economic boom. It is the satisfaction and world recognition that drive countries to bid for the Games. German sports economist Wolfgang Maennig often illustrated the Olympics as throwing a big party for your friends and overspending, hoping they go away and remember you fondly (Pti, 2021). Nonetheless, all is not lost for Japan. The renovations conducted by restaurants and hotels to originally facilitate foreign customers during the Games are expected to attract more tourists, which will stimulate income in the later years. Moreover, future spendings are saved as the newly-constructed National Stadium and the Athletes’ Villages with their surrounding facilities were pre-designed to be a cultural site and a residential area respectively (Hornyak/Tokyo, 2021). Furthermore, the shift to watching the Olympics within the limits of home led to an increase in sales of electronic devices. As observed by Bic Camera co., there was a 30% surge in the trading of OLED TVs compared to recent years (Hornyak/Tokyo, 2021). Hence, despite the financial issues in the beginning, Japan may be able to reap the benefits in the later years. Only time will tell whether the Olympic legacy prevails for the Land of the Rising Sun.
References: Demsas, J. (2021, August 1). Hosting the Olympics comes at a massive cost. Vox. https://www.vox.com/22599732/olympics-tokyo-2020summer Kleen, B. (2021, July 20). The Olympic Games Keep Breaking Their Budgets. Can Skyrocketing Costs Be Controlled? Global Sport Matters. https://globalsportmatters.com/business/2021/07/21/tok yo-olympics-breaking-budgets-skyrocketing-costscontrolled/#:%7E:text=With%20an%20official%20price %20tag,the%20most%20expensive%20Games%20eve r. Lies, E. (2021, June 10). Factbox: Money, money, money: the cost of Tokyo’s pandemic-delayed Olympics. Reuters. https://www.reuters.com/business/mediatelecom/money-money-money-cost-tokyos-pandemicdelayed-olympics-2021-06-10/ Pti, A. P. |. (2021, August 7). Tokyo Olympics cost $15.4 billion. What else could that money buy? Www.Business-Standard.Com. https://www.businessstandard.com/article/sports/tokyo-olympics-cost-15-4billion-what-else-could-that-money-buy121080700159_1.html#:%7E:text=Home-,Tokyo%20Ol ympics%20cost%20%2415.4%20billion,else%20could %20that%20money%20buy%3F&text=The%20official% 20price%20tag%20for,the%20most%20expensive%20o n%20record. Cervantes, A. (2021, July 24). The Tokyo Olympics’ Staggering Price Tag and Where It Stands in History. WSJ. https://www.wsj.com/articles/the-tokyo-olympicsstaggering-price-tag-and-where-it-stands-in-history11627049612 Hornyak/Tokyo, T. (2021, August 11). Even With No Tourists or Fans, Japan Is Already Seeing Economic Benefits From the $15.4 Billion Tokyo Olympics. Time. https://time.com/6089274/tokyo-olympics-economicbenefits/
Image via https://www.fivb.org/Vis2009/Images/GetImage.asmx?No=202012446&maxSize=0
IMAGE VIA https://i.insider.com/6107b590ea74d40019ba123d?width=700
image via https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i44KVDlCSFEc/v1/-1x-1.jpg
image via https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ie6jTmlwY99o/v1/-1x-1.jpg
image via https://media.timeout.com/images/105786912/image.jpg
image via https://cdn-japantimes.com/wp-content/uploads/2021/06/np_file_94144.jpeg
Editorial
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A featured piece submitted by passionate individuals from the KY community
Malaysia’s Startup Ecosystem: An Overview What are Startups and Why are they Important?
by muiz zafri
Ever wondered how companies like Grab are valued at billions of dollars despite only starting services in 2012? As Malaysians, it should be encouraging to observe that the nation accommodates a number of notorious brands among the startup scene such as Carsome and Boost. The popularity of running small and medium enterprises (SMEs) - startups being a subset of it - is essential to the national economy contributing to about 38.2% of the annual national GDP (The Star, 2019). Collectively, the startups in Malaysia have raised an estimated total of USD $200 Million in fundraising - gaining traction within the ASEAN region in 2020 alone (Tech in Asia, 2021). You might question, why do investors and the public put so much faith in these startups? Why not invest in bigger and more established companies that earn billions a year where the return on investment is assured? Startups are more robust in nature, they are usually led by a group of young and driven entrepreneurs passionate in bringing their unique products or services to the market. The startup ecosystem in countries play a significant role in economic growth as it spurs job employment, innovation and injecting competition to existing monopolistic economies. For instance in China, Alibaba single-handedly transformed the trade scene for SMES, a country infamous for its trade entry barriers. Oftentimes, these startups also introduce products that revolutionise the world, perhaps in the form of an e-hailing service or a digital wallet for instance. The opportunity to latch on to the success of a potential life changing movement are what makes these companies highly sought after by lucrative investors all over the world.
How does Malaysia Support the Local Startup Scene? Back home, other than the unicorn startup Grab, Malaysia’s economy has sparked the rise of thousands of tech-based startups through its establishment of the Malaysian Digital Economy Corporation (MDEC) and the Malaysia Venture Capital Management Berhad (MAVCAP). The two bodies serve as an assisting arm for the government to provide a conducive environment for startups to prosper. Image Via https://i0.wp.com/www.businesstoday.com.my/wpcontent/uploads/2020/07/Slide2-1.png?ssl=1
They act as a catalyst and a launchpad for small infant-industries to be exposed to a global network of investors and obtain consultation on digital innovation with their supportive .policies (MDEC, 2021). As MDEC and MAVCAP’s valiant efforts persist to this very day, Malaysia has been notably ranked at the 11th spot in emerging ecosystems for performance-based startups with an ecosystem value of USD $15 Billion: 40% higher than the global average (Startup Genome, 2020). While this number increases over the years, Malaysia is positively developing into an international hub for startups, impacting the economy positively by encouraging employment which contributes to the national GDP as a whole.
8 Has the Pandemic Threatened or Boosted Startups Development? Unprecedented times require bold decisions to be made, Covid-19 was undoubtedly a force that challenged all of Malaysia’s startups. The crisis has shook the once ‘robust arena’ as the economy was brought down to its knees. While the government released a series of stimulus packages such as the PRIHATIN package, fiscal injection barely sufficed. About 10% of the 168 startups across the nation had to cease their operations while the remaining stay afloat through the restructuring of their business models (Malaysian Global Innovation Centre, MaGIC, 2020). Evidence showed that more than half of startups in the country observed a 50% decline in revenue due to the pandemic, hence, requiring founders to generate creative ideas to push through the conditions (Tech in Asia, 2021). This was one benefit of the pandemic, where growth and innovation spur through facing hardships. Companies had to be more adaptive and decisive in making decisions at a faster rate as every second was precious in ensuring the continuity of their efforts. Management teams went back to the drawing board finding solutions to bring their services online. Towards mid-2021, collaborations prospered, creating a closer knit community between CEOs, enhancing the prospects for the future undertakings of their companies. Gone were the days of redundant conventional business models - the pandemic has shed light on Malaysia’s increasing effort in becoming a global hub for startup development.
A Reflection of our Roles Overall, it is essential for us as consumers, investors, and citizens to preserve this rising culture of entrepreneurship in our country. The journey stepping out of the economic devastations pandemic was not the product of shortcuts but the interdependent relationship between different parties within the economy. While we rest in the safety of our homes, we could also play a part in supporting our local SMEs by consuming their products and services. Healing requires action, and that action can be reflected by the successes of our local startups.
Image Via https://www.carsome.my/news/item/carsomekelana-jaya-is-now-bigger-and-better
References: Lee, J., (2019). “Startup Opportunities Abound.” The Star. https://www.thestar.com.my/business/smebiz/2019/01/14/startup-opportunities-abound/ Business Today, (2020).“KL is Ranked 11th Emerging Startup Ecosystem in the World with Value of USD15b.” Business Today, https://www.businesstodaBusy.com.my/2020/07/01/kl-is-ranked-11th-emerging-startup-ecosystem-in-the-world-with-a-value-of-usd15b/ MDEC, (2021). “Who We Are.” MDEC. https://mdec.my/about-mdec/who-we-are/ Daga, A., (2021). “Analysis: Grab's Nasdaq debut to test its $40 billion valuation, set roadmap For SPAC hopefuls.” Thomson Reuters. https://www.reuters.com/article/grab-strategy-idINKBN2CF0XH Startup Genome, (2020). “Global Startup Ecosystem Report 2020 (GSER 2020).” Startup Genome. https://startupgenome.com/subscribers/611a6a3c018c09003e2f3b05/reports/5ef3916b2775fe003e2be462 Noordin, A., (2020). “Growing the Local Venture Capital Industry.” The Edge Malaysia. https://www.theedgemarkets.com/article/cover-story-growinglocal-venture-capital-industry Felatvero, N., (2020). “The makings of greatness: How Malaysia can become a top-tier startup ecosystem.” Tech In Asia. https://www.techinasia.com/makings-greatness-malaysia-toptier-startup-ecosystem Life News Agency, (2021) “Malaysia: A New Haven for Startups and Tech Innovations.” Life News Agency. https://my.lifenewsagency.com/2021/04/24/malaysia-a-haven-for-startups-and-tech-innovations/
Blast from the Past
Recounting a significant event that occurred in the past in this same month
Social Security Act of 1935 Helping the workforce save for retirement in a way similar to Malaysia’s Employees Provident Fund (EPF), this article will recount the establishment of US’s Social Security. The US Social Security Act of 1935 was signed into law by President Franklin D. Roosevelt on August 14 1935. It includes provision of unemployment benefits, retiree pensions, as well as aid for children, the blind, people with physical disabilities and victims of workrelated accidents. It was a part of President Roosevelt’s New Deal programme that aimed to relieve the immense suffering and economic loss of Americans during the Great Depression. Before Social Security was established, poverty upon retirement was a constant concern for ageing citizens. With the lack of aid from the government, the responsibility of care for the elderly always fell on family members. There were only pensions for veterans under the Civil War Pension program of 1862; this started as benefits only linked to disabilities from military duty, and gradually extended to pensions for widows, orphans and old-age veterans. There are some similarities here to the Social Security Act that followed. (Historical Background And Development Of Social Security, n.d.) Social Security is not funded by government funds but by contributions from payroll tax. With Social Security numbers being distributed in late 1936, the US Government started collecting Social Security tax in 1937 and began to distribute benefits in 1940. (Historical Background And Development Of Social Security, n.d.)
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by Yaann tan At first, the original Act only contained retirement benefits, which fell under two categories. Title 1 was “Grants to States for Old-Age Assistance”, which was a temporary "relief" program that would disappear as more people were able to obtain retirement income through Title 2. “Federal Old-Age Benefits” (Title 2) were based on payroll tax contributions that the worker made during his/her working life which would be paid to the worker when he/she retired at age 65. Title 2’s system is regarded as a social insurance programme which is when workers themselves contribute to their own future retirement benefit by making regular payments into a joint fund. (Historical Background And Development Of Social Security, n.d.) In 1939, the Act was amended to include dependent benefits (payments to spouses and minor children of a retired worker) and survivor benefits (payments to the family of a prematurely deceased covered worker). In 1954, benefits for disabled workers were included, and in 1960, payments to their dependents were started. (Historical Background And Development Of Social Security, n.d.) In Roosevelt’s Presidential Statement upon signing the Act, he stated that the Act “lessens the force of possible future depressions” by reducing “the necessity of going deeply into debt to furnish relief to the needy”. “The law will flatten out the peaks and valleys of deflation and of inflation,'' he said. (Social Security History, n.d.)
Key Term:
References: Historical Background And Development Of Social Security. (n.d.). Social Security Administration. Retrieved July 22, 2021, from https://www.ssa.gov/history/briefhistory3.html
Payroll tax - a percentage withheld from an employee's pay by an employer who pays it to the government on the employee's behalf
Social Security History. (n.d.). Social Security Administration. Retrieved July 22, 2021, from https://www.ssa.gov/history/fdrsignstate.html
Image Via https://www.ssa.gov/history/briefhistory3.html
KY-ASU ECONOMIST APPROVED
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August's Theme:
Nurturing Malaysian Minds to Create a Satu Malaysia Economy
by Angeline Tan
IDEAS [ Think-Thank] What Is It Malaysia's first think-tank dedicated to promoting market-based solutions to public policy challenges. (Taken from: https://www.instagram.com/ideasmalaysia/) Why I Recommend It They produce policy papers based on the Malaysian economy & opinionated pieces which give you an insight into what these professionals think. They also host events which you can find on their Youtube channel. As they have experts in the field doing extensive research, I strongly suggest that you take a look at their work. This is some high-quality content you will not want to miss out on!
The Association of Malaysian Economics Undergraduates (AMEU) [Organization] What Is It A student-run non-profit organization aimed at raising social and economic awareness among the youth while providing a healthy platform for constructive discourse on economics-related issues. (Taken from: https://ameuglobal.com/about-us/ ) Why I Recommend It The EconBites Instagram stories are a great way to get updated on current events! Econsider is a series of evidence-based articles, and they also post cool infographics on complicated economic terms under the project Econfused. Furthermore, they host regular free events. As they are run by undergraduate students, most of their materials are easily accessible and curated specifically for students!
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The Star - Economy [Newspaper] What Is It The Star content includes current news, business, sports, community, tech, lifestyle, and world news, as well as expert analysis and dynamic videos. ( Taken from: https://www.thestar.com.my/aboutus ) we Why I Recommend It If you want to learn more about the Malaysian and South East Asian economies, they have short articles written in English which are easy to comprehend for anyone with a basic level of English. Moreover, if you are a KYUEM student, our school has The Star online subscription made free for us!
CARI ASEAN [Think-Thank] What Is It CARI ASEAN Research and Advocacy is an independent think tank created to support the ASEAN economic integration and development through policy research and advocacy. (Taken from https://www.cariasean.org/about-us/#.YPmDTS2Q3u0) Why I Recommend It If you are looking to learn more about ASEAN, I strongly recommend you check out this think-thank. They have events which you can check out on their Youtube channel and publications which you can access through their website. I strongly recommend you get to know what ASEAN is and what economic integration does.
TNEMNIATRETNOCE
12 WORD SEARCH - ECONOMIC TERMS
By Abirrami Gunalan
[Mercantilism] Mercantilism was an economic system originating in the 16th-century which advocated maximizing exports and restraining imports to strengthen the domestic economy. Government interventionist policies such as tariffs, quotas, and subsidies were considered mercantilist methods. Mercantilism was a common practice used in the past by many countries in Western Europe that sought to be selfsufficient while generating wealth and power. [Laissez-Faire] The term Laissez-Faire translates to 'leave alone'. Generated in the 18th century by French Physiocrats, it is an economic philosophy that advocates for capitalism and limited government intervention. This concept states that the economy should be left to its natural state as businesses will be better off and more motivated with lesser restrictions in place. [Keynesian Economics] Developed by British Economist, John Maynard Keynes, Keynesian economics is a famous macro school of thought which reinforces aggregate demand being the most important driving force in the economy. Aggregate demand consists of consumption, investment, government, and net exports.
By Abirrami Gunalan
OGNILNOCE
[some economic jargon explained]
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CREDITS WRITERS : Abirrami Gunalan Angeline Tan Emeline Yong Muiz Zafri Qaisara Suffian Saffiyah Khusna Yaann Tan
EDITORS : Cheah Yi Wen Dakshayini Mahendran Raeyn Rezqi
teacher advisor : Ms Thanalatchemy Karuppiah