19-policy - Fiscal and Monetary Policy With A Goods and...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Fiscal and Monetary Policy With A Goods and Services Market AND Money Market Lecture 19-PREVIEW Jennifer P. Wissink ©2009 Jennifer P. Wissink, all rights reserved. April 5, 2010 macroS2010 Lec19-page 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
http://www.arts.cornell.edu/econ/wissink/econ102jpw/ An INCREASE in G G AE d Y M D r I d AE d Y Finally… get a new r* and Y* Note: with feedback effect, there is a smaller final change in Y* macroS2010 Lec19-page 2
Background image of page 2
http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Issue: The Crowding-Out Effect of Expansionary Fiscal Policy The crowding-out effect is the tendency for increases in government spending to cause reductions in private investment spending. The crowding-out effect depends on the sensitivity or insensitivity of planned investment spending to changes in the interest rate and the sensitivity or insensitivity of money demand to changes in Y and the interest rate. So, efficacy of fiscal policy depends on some important sensitivities! macroS2010 Lec19-page 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Issue: Fed Accommodation of Fiscal Policy (of an Expansionary Fiscal Policy, in this case) An expansionary fiscal policy (higher government spending or lower taxes) will increase aggregate output (income). In turn, higher income will shift the money demand curve
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 18

19-policy - Fiscal and Monetary Policy With A Goods and...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online