chapter 11 - Macro Review Sheet Chapter 11 Fiscal policy...

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Macro Review Sheet Chapter 11 - Fiscal policy –The use of government spending and taxes to influence the nation’s spending, employment, and price level. - Discretionary fiscal policy – The deliberate use of changed in the government spending or taxes to alter aggregate demand and stabilize the economy. o Follows the Keynesian argument that the federal government should manipulate aggregate demand in order to influence the output, employment and price levels in the economy. o Requires new legislation to change either government spending or taxes in order to stabilize economy Expansionary Fiscal Policy Contractionary Fiscal Policy Increase government spending Decrease government spending Decrease taxes Increase taxes Increase government spending and taxes equally Decrease government spending and taxes equally - Using either the expansionary or contractionary fiscal policy, the government can shift the aggregate demand curve in order to combat recession, cool inflation, or achieve other macroeconomic goals. -
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This note was uploaded on 03/17/2009 for the course ECON 104 taught by Professor Dolenc during the Spring '08 term at UMass (Amherst).

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chapter 11 - Macro Review Sheet Chapter 11 Fiscal policy...

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