Econ Chapter 15

Econ Chapter 15 - Econ Chapter 15 Goals of Macroeconomics...

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Econ Chapter 15 Goals of Macroeconomics 1. Full employment 2. Price Stability 3. Economic Growth Fool in the shower 1. based on lags in economic policy 2. due to lags policy is inefficient a. recognition lag b. implementation lag c. response lag NBER- National Bureau Economic Research Tells us when we are in recession Recession- 2 consecutive quarters of decline in GDP (quarter = 3 months) Fiscal Policy has automatic stabilizer (Income tax brackets) Federal Government just screws up discretionary policy Arthur Laffer Inverted yield curve = predicts a recession Objectives of Monetary and fiscal policy (Stabilization) Stabilization Policy – monetary/ fiscal policy: aims to smooth fluctuations in output (y) and employment and to keep prices as stable as possible Time lags- delays in the economy’s response to stabilization policies (3 types) o Recognition o Implementation o Response Milton Friedman- “fool in the shower” o Liens government to a fool o Turns up hot water and down really cold water
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Econ Chapter 15 - Econ Chapter 15 Goals of Macroeconomics...

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