Assignment on Baby-sitting the economy

Summary of Baby-sitting the economy

In this article, the author Paul Krugman talked about the art of babysitting. He said that baby-sitting cooperation is teaching about something that can easily save the world. At the start of this article, the author told a miserable story about the economy of the world. This story was told in the article named “Monetary Theory and the Great Capitol Hill Baby-Sitting Co-op Crises.” The author had used this story in two different books. In the first part of the article, he discussed in detail about Sweeney’s story. Then according to the given scenario in the story, the Capitol Hill Co-op was interested in adopting one fairly natural solution.

This solution mostly related to baby sitters. Then after this, he talked about the small technical problem that is present in the coupon system. Due to this, the Co-op fell into a recession. The main reason was that the members of the Co-op were mostly lawyers. Later on, in the article, the author has explained the story in the form of an example. In the example, he talked about the stock market of the US that is going to be crash. This example is also explaining the whole story that was discussed above. The author relates the story because he wanted to tell that if there is a fall in the economic condition, then it is not a big deal. In this article, he has also given some important solutions to deal with the problem. The author has also discussed some different scenarios related to babysitting. In the last, the author has given an important message for dealing with the issue of economic stability (KRUGMAN, 1998).

Question 2

In the article, the author has given an alternative method related to the fair share of the babysitting Co-op. due to this, the federal government is extremely aggressive related to its monetary policy. This will be like that they have to give loans to the American adult of 1000 dollars at a low interest rate. Due to this, there will be a helicopter drop in the economy. This is one of the best solutions for the fair share that will avoid the fiscal stimulus. Another thing is that Capitol Hill also adopted a fairly natural solution that is related to the scrip pieces of paper, and they are equal to the one-hour time of the babysitting. This shows that the baby sitters will receive the appropriate number of coupons from the baby sittees. Due to this, that system will become self-enforcing.

Question 3

From the article, it can be seen that the Co-op handle the recession in an effective way. There are also other methods to deal with this issue. The author talked about the monetary policy for dealing with the recession issue. He also said that it is not easy to change the carpenter into a nurse, and also it is not easy to change mortgage brokers into computer expert. This shows that it will sort out the stuff by itself. Through this, people will go for new industries for finding jobs, but with the help of this policy, it will be impossible to retrain people.

Furthermore, there are some main premises through which this recession can be overcome easily without any difficulty. It can be noted that the recession is costly. There are many people how losses their jobs and income. Moreover, the economy also wastes resources and due to this, they have to face a permanent lower output path. The next premises are related to the fiscal policy. It is also an effective aspect of the government that will respond to this recession. The next thing is that fiscal policy will increase the output and also increase the utilization of the main resources. The next thing is that when monetary policy is reducing the interest rate to zero then it is necessary to shift the economy direction towards upward. Additionally, the government also have to increase the automatic nature of fiscal policy. Due to this spending will be increase and it will lead towards small recession.  

Question 4

In the article, Krugman has explained important information related to the extra coupons and also relay on them. But due to this, there was a huge impact on the economy. But this problem has been solved under the new system. This shows that the couples will hold smaller reserves of coupons. This means that they will borrow the coupons when it is required. On the other hand, the Co-op’s officer is required to implement a new tool for management. The next thing is that if the member of the co-op is reported in the office, then it will become extremely easy to find that baby sitter. Moreover, if the member of the firm will borrow different coupons and also encourage the couples to go out and hire baby sitters. Now in the next case, if there are a low number of baby sitters, then they have to encourage the people to go out sometimes.

Question 5

It can be noted that a low amount of scrip will lead to recession. The main reason is that if the Co-op issues more coupons, then it will lead to different kinds of problems. There was one way through which Co-op will cause the recession that will move toward depression. When the Co-op allows the couples to buy the coupons as much they wanted, then this condition will lead towards that point.

on the other hand, a great recession is completely different from the recession. This is because, in recession, the depression rate is low as compared with the great recession.

Reference of Baby-sitting the economy

KRUGMAN, P. (1998). Baby-Sitting the Economy. THE DISMAL SCIENCE.