If there is a long drawn-out war with Iraq (or any other :: Economics

If there is a long drawn-out war with Iraq (or any other country), what implications might this have for Britain's fiscal deficit? Also trace out the possible effects, if any, on: a) Monetary Policy, b) Inflation and c) Unemployment. The economic policy followed by a country engaged in war is ,certainly, different of that followed by a country when in peace. Britain now finds itself a few steps away from war with Iraq and the questions concerning the implications of this ,unnecessary for many, war are not little. Firstly, before we analyze the effects of war with Iraq on fiscal policy and deficit of the UK we must briefly outline the role of fiscal policy and what is a fiscal deficit. Fiscal policy is a so-called demand management policy and is defined as the manipulation of government expenditures and/or of taxes in order to influence aggregate demand and thus economic activity and employment. In the case of Britain, there is a fiscal deficit. A rise in government expenditures and/or a decrease in taxes (i.e. an increase of injections over withdrawals) leads to an even greater (through the multiplier) rise in national income and thus of employment. Deficit spending could lead to an expansion of economic activity; this policy is known as expansionary (or, reflationary) fiscal policy. It can be said, with great certainty, that Britain's fiscal deficit will increase largely during the war. Being an OECD[1] member country and a country with similar economic performance from time to time, Britain can be considered largely an economy with many common aspects to the U.S. economy in many aspects. The U.S. economy had three major peaks in deficits and all of them reflect wars: the Civil War of the 1860s, WWI and WWII. So one can expect that a long drawn-out war with Iraq will mean that the British economy will run on deficit for a long time. This should not suggest that deficits will occur after the war as well, though. U.S. economy has recovered and reduced the stock of debt after these wars. There are also political factors that need to be considered in the case of Britain. Because of the high public unrest and anti-war movement that occurred in Britain before the war the government might feel obliged to prove to the people that war against Iraq was a wise thought. UK government would be able to provide that short-term feel-good factor by cutting taxes and possibly increased spending. If pressure on the government mounts, and it is already mounting very fast with numerous resignations and public protests, it is very likely that it would see more clearly the If there is a long drawn-out war with Iraq (or any other :: Economics If there is a long drawn-out war with Iraq (or any other country), what implications might this have for Britain's fiscal deficit? Also trace out the possible effects, if any, on: a) Monetary Policy, b) Inflation and c) Unemployment. The economic policy followed by a country engaged in war is ,certainly, different of that followed by a country when in peace. Britain now finds itself a few steps away from war with Iraq and the questions concerning the implications of this ,unnecessary for many, war are not little. Firstly, before we analyze the effects of war with Iraq on fiscal policy and deficit of the UK we must briefly outline the role of fiscal policy and what is a fiscal deficit. Fiscal policy is a so-called demand management policy and is defined as the manipulation of government expenditures and/or of taxes in order to influence aggregate demand and thus economic activity and employment. In the case of Britain, there is a fiscal deficit. A rise in government expenditures and/or a decrease in taxes (i.e. an increase of injections over withdrawals) leads to an even greater (through the multiplier) rise in national income and thus of employment. Deficit spending could lead to an expansion of economic activity; this policy is known as expansionary (or, reflationary) fiscal policy. It can be said, with great certainty, that Britain's fiscal deficit will increase largely during the war. Being an OECD[1] member country and a country with similar economic performance from time to time, Britain can be considered largely an economy with many common aspects to the U.S. economy in many aspects. The U.S. economy had three major peaks in deficits and all of them reflect wars: the Civil War of the 1860s, WWI and WWII. So one can expect that a long drawn-out war with Iraq will mean that the British economy will run on deficit for a long time. This should not suggest that deficits will occur after the war as well, though. U.S. economy has recovered and reduced the stock of debt after these wars. There are also political factors that need to be considered in the case of Britain. Because of the high public unrest and anti-war movement that occurred in Britain before the war the government might feel obliged to prove to the people that war against Iraq was a wise thought. UK government would be able to provide that short-term feel-good factor by cutting taxes and possibly increased spending. If pressure on the government mounts, and it is already mounting very fast with numerous resignations and public protests, it is very likely that it would see more clearly the