Unit Three - Unit Three Economic Manipulations Governmental...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Unit Three : Economic Manipulations : Governmental Roles : (1) stabilize our economy; avoid wild in-fluctuation. Stabilization Tools : John Keynes (pre WWII) => one of our “economic gods.” Laissez Faire : hands off; government leaves economies alone and lets it fluctuate. => conservatives or classicals. Kaynes/Liberal Approach : using stabilization tools to keep economy balanced. 1) Fiscal Tools: (a) Governmental Spending => G (b) tax => t PGDP (potential GDP) AGDP (actual GDP) PGDP = AGDP PGDP > AGDP => recession => Gov goal = increase the actual. PGDP < AGDP => inflation => Gov goal = decrease the actual. GDP = C + I + G + ( X – M ); Y = income Yd = Y – t Yd = C + SAVE Y – t = C + SAVE Y – t – SAVE = C GDP = ( Y – t – SAVE ) + I + G + ( X– M ) GDP = Y [+ I + G +X][ – t – SAVE – M] inj = leakages then, GDP = Y
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
recession => gov want to increase GDP increase gov spending => increase GDP recession => lower taxes lower taxes => increases consumption => increases GDP inflation => gov wants to lower GDP decrease gov spending => decrease GDP inflation => increase taxes increase taxes => decrease consumption => decreases GDP Monetary Policies : (money) 1) Money Supply : Recession: increase money supply => consume more => increase GDP Inflation: decrease money supply => consume less => decrease GDP 2) Interest Rate : (i) the price for capitol. Recession: decrease interest rate => increase income => increase GDP Inflation: increase interest rate => decrease income => decrease GDP Post WWII : 1945- Harry Truman: Post war inflation : too much consuming.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern