Deficit Reduction, Fed Behavior, Stablization, Stock Market Effects, and Macro Issues Abroad

Deficit Reduction, Fed Behavior, Stablization, Stock Market Effects, and Macro Issues Abroad

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Econ 4.3 Friday, April 9, 1999 Announcements: Homework is due on Friday. Online quiz will be taken offline on Friday. Lecture notes: Chapter 16: Deficit Reduction, Fed Behavior, Stablization, Stock Market Effects, and Macro Issues Abroad Deficit Reduction, Fed Behavior, Stabilization, Stock Market Effects and Macro Issues abroad Attempt by Congress o Gramm -- Rudman -- Hollings Bill o 1986 law set out to reduce the deficit by $36 billion per year with a deficit of zero slated for 1991 Automatic Stabilizers Automatic Stablizers are those revenues and expenditure items in the federal budget that automatically change with the economy in such a way
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Unformatted text preview: as to stablize GDP Destablizer: Without deficit Targeting ( see Figure 16.2 on page 341 in the text ) The Fed's Response to High Output/High Inflation During periods of high output/high inflation, the economy is on the relatively steep portion of the AS curve. In this case, the Fed is likely to contract the money supply. See Figure 16.4 on page 343 in the text for the graph Monetary Policy Fiscal Policy Get rid of deficit by reaching full employment Policy Issues Recognition Implementation Time lag for effectiveness...
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This note was uploaded on 02/21/2008 for the course ECON 4.3 taught by Professor Fox during the Spring '99 term at Pennsylvania State University, University Park.

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Deficit Reduction, Fed Behavior, Stablization, Stock Market Effects, and Macro Issues Abroad

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