ECO 17 - 2 MAR - Lecture 17 ECO 100Y5Y 2 March 2009 A....

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Lecture 17 2 March 2009 ECO 100Y5Y A. Cohen 1 E C O N O M I C S PARKIN BADE Lecture 17 2 March 2009 E C O N O M I C S PARKIN BADE Chapter 24 Fiscal Policy Government Budgets Budget purposes finance government activities fiscal policy achieve macroeconomic policy objectives smooth business cycle fluctuations
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Lecture 17 2 March 2009 ECO 100Y5Y A. Cohen 2 Fiscal Policy Multipliers Fiscal policy automatic — triggered by state of economy discretionary — initiated by Parliament involves Δ government spending, Δ taxes Taxes induced taxes — vary as Y varies (measured by marginal tax rate (t)) autonomous taxes — ( T a ) do not vary continued Slope AE = e Government expenditures multiplier = = Δ Δ Y G e 1 (1 ) continued Δ G = $50 b AE 1 = 300 + .75 Y E' A' B' C' D’ 1200 D' 1200 Δ Y = $200 b 900 1000 1100 1300 900 1000 1100 1300 45 o line A B C D E AE 0 = 250 + .75 Y 0 Δ Y Δ G = 4 AE Real GDP Figure 24.8 Government Expenditures Multiplier
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Lecture 17 2 March 2009 ECO 100Y5Y A. Cohen 3 Autonomous tax multiplier
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This note was uploaded on 04/25/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Fall '09 term at University of Toronto- Toronto.

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ECO 17 - 2 MAR - Lecture 17 ECO 100Y5Y 2 March 2009 A....

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