Econ 102 Chapter 15 Study Guide

Econ 102 Chapter 15 Study Guide - Econ Chapter 15 Study...

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Econ Chapter 15 Study Guide 01:29 Fiscal Policy:  Changes in federal taxes and purchases that are intended to  achieve macroeconomic policy objectives, such as high employment, price  stability, and high rates of economic growth.  Automatic Stabilizers versus Discretionary Fiscal Policy: Automatic Stabilizers:  Government spending and taxes that automatically  increase or decrease along with the business cycle. o Ex:  when the economy is expanding and unemployment is increasing,  government spending on unemployment insurance payments to works  who have lost their jobs will automatically decrease.  Discretionary Fiscal Policy:  the government taking actions to change  spending or taxes.  An Overview of Government Spending and Taxes: Federal Government Expenditures : include purchases plus all other federal  government expenditures.  The four categories of federal government expenditures:  interest on the  national debt, grants to state and local government, transfer payments, and  purchases. o Interest on national debt:  represents payments to holders of the bonds  the federal government has issued to borrow money. o Grants to state and local governments:  are payments made by fed  government to support government activity at the state and local levels.  o Transfer Payments:  the largest and fastest growing category. Includes  Social Security, unemployment insurance… They are 44% The Effects of Fiscal Policy on Real GDP and the Price Level: Congress and the president carry out fiscal policy through changes in  government purchases and taxes. o When the economy is in recession, increases in government purchases or  decreases in taxes will increase aggregate demand.  o Decreasing government purchase or raising taxes can slow the growth of  aggregate demand and reduce the inflation rate. 
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This note was uploaded on 03/09/2009 for the course ECON 102 taught by Professor Drozd during the Fall '08 term at University of Wisconsin.

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Econ 102 Chapter 15 Study Guide - Econ Chapter 15 Study...

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