The article discusses that the US may face a fiscal cliff in order to reduce the large deficit that has accumulated in the past. A fiscal policy stands for a series of major tax increases and government spending cuts if Congress does not act. The article discusses that through lower government spending and higher taxes it is expected that $600 billion can be extracted from the economy to decrease the debt. However economists think that every dollar of deficit reduction will subtract the same or a greater amount from economic growth. In theoretical terms this would make sense. If government spending decrease this reduces aggregate demand in the economy and by that will cause a decrease in real GDP. Households will cut back on purchases and especially households that are dependent on government support through unemployment benefits will suffer from the policy. Although this will decrease the deficit of the US it may be that it distracts the fragile recovering economy. 

Iceland has been in a serious recession with great inflation rates for several years. To control the situation, the Central bank has started to raise interest rates with the hope to decrease inflation and bring prices back to normal levels. By increasing interest rates consumers will stop borrowing as much money which will cause a decrease in consumption. In addition it will become more expensive for firms to borrow money for their investments and they will decrease investments well. Overall these two factors will cause a decrease in aggregate demand in Iceland. This will push down prices and cause disinflation in the long run. Due to these decreasing prices goods and services from Iceland become more attractive to foreign consumers causing an increase in exports which may strengthen the currency. The article states that due to the increased interest rates inflation remained stable for the past months. This shows that households and firms are consuming/investing less which stops further inflation.

The article discusses the increasing level of unemployment in Spain hitting record levels. Currently around 5.7 million Spanish are out of work. Traditionally this number decreased during the second quarter of the year during the tourist season however this year unemployment rose to 24.6% during that time. 53% of the unemployed are under 25. This may have great effects in the future once Spain's economy recovers. The younger generation will want to take over jobs of the older generation. However due to the lack of training they may not have the skills required. The amount of jobs has decreased so much that almost half of the unemployed have been out of work for more than a year. This is largely due to a cut in government, regional and municipal spending that has decreased the number of workers in the public sector by 5% in the past year. Because the number of unemployed is so high and is constantly increasing the government had to cut their unemployment benefits leaving only around 40% in certain areas receiving unemployment benefits. The reason causing the high unemployment is the recession that Spain is currently in. In the future crime rates may increase in Spain as many households have no income and are losing their unemployment benefits from the government. 

Indonesia has been experiencing rapid economic growth which has increased the size of the middle class as well as their disposable incomes. The article describes how an increase in required down-payments on cars and houses may decrease the growth in Indonesia's economy. Last year the automotive finance growth of banks was 55%, the highest in the world. They have noticed that this is an unsustainable rate of growth. Due to these fears the Indonesian central bank has placed new regulations which will make buyers pay higher down-payments when making a purchase on credit. These down-payments have been increased from originally 10-20% to 30% and more. With that households see themselves with less money available for consumption. The new regulations may also result in a dip in property sales as aggregate demand decreases. However on the other side it may also only defer sales, since people will safe longer until they buy property.