Macroeconomic effects of a war with Iraq

Macro frugal effects of a fight with Iraq

Earlier this year (2003) with the looming and seemingly unavoidable conflict in Iraq drawing increasingly near, doubt from several(a) areas and parties arose everyplace the justification of a war in Iraq. If Iraq invaded Australia or the U.S. then an inarguable case is presented for action and as a consequence; increased military machine pass is necessary, expected and enjoys an noncontroversial existence. In contrast, the reality of the recent situation involved long uncertainty over the justification of a war. Consequently, the have intercourse of economic cost was included in much of the political logical argument which filled the turbulent atmosphere that preceded the start of the conflict in the Middle East. Garnaut (2003) provides such example of this in his Sydney Morning harbinger article Conflict tipped to rip billions from local economy.

Economists argue over the relative importance of the economic factors involved that go away summate to the overall economic cost of a war in Iraq but it is generally accepted that the major costs will come from: increasing debt stemming from increased brass spending (mainly military at first), higher oil prices and general uncertainty jumper lead to lessened economic activity.



McKibbin & Stoeckel (cited in Garnaut 2003) places greater vehemence on the increase in fiscal deficits due to special government spending than other factors, whilst Garnaut (2003) himself seems to believe an inevitable fountain in the price of oil will have a significant effect although restrains himself from saying this directly.

First lets look at the issue of increased government spending. In the event of a war in Iraq involving Australia there would be significant rises in government spending/purchases, initially the majority of this would be military related to and with time a greater proportion of the increased spending may come in the form of aid and...

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