Long–Run Consequences of Stabilization Policies

Factories and machinery used for production.

Stocks and bonds owned by individuals.

Skills acquired through education and training.

The country’s reserves of natural resources like oil or timber.

It leads to immediate deflationary pressures across all sectors.

It causes persistent hyperinflation due to excessive money supply.

It creates short-term economic booms followed by busts.

It anchors inflation expectations, reducing volatility.

Saving primarily affects aggregate output

Saving has no impact on economic growth

Saving is important for investing in factors that contribute to economic growth

Saving is only necessary for government policies

Investment in R&D typically yields immediate returns that boost current consumption.

High spending on R&D diverts funds away from essential public services hindering growth.

Less focus on R&D encourages broader distribution of existing technologies improving accessibility.

Investment in R&D promotes technological advances that increase production efficiency.

Human capital increases productivity which can complement stable prices for sustained growth.

Companies invest less in training employees fearing cost-induced uncertainty during target implementation.

Border controls tighten limiting skilled immigration based on perceived employment risks post-inflation targeting.

Universities slash tuition fees significantly anticipating deflation from strict monetary measures.

Median income

Poverty line

Fiscal deficit

Real wage

Immediate wage decreases across affected industries might discourage workforce education enhancement.

Greater revenue generation allows immediate increases in educational spending without trade-offs.

Increased cost burdens could drive industries abroad, reducing domestic education investments.

Lower pollution levels could improve health outcomes leading to greater labor productivity.

A decrease in resources

Higher consumer prices

An increase in unemployment

Economic growth

Real GDP per capita and investment levels

Natural resources and technology advancements

Aggregate employment and aggregate output

Technology, physical capital, and human capital per worker

Sales Taxes

Investment tax credits

Price Ceilings

Import Quotas