lec19slides - Aggregate Output with Government Taxation:...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
3 Aggregate Output with Government Taxation: Takes money away from consumers. Reduces consumption. Government spending: Government buys goods and services. Increases total expenditures. 7 Fiscal Policy Use of taxation and government spending to affect aggregate output. Higher taxes Lower aggregate output. Higher spending Higher aggregate output.
Background image of page 1

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

View Full DocumentRight Arrow Icon
9 Recall, with no government: Planned expenditures: AE = C + I Consumption increases with Y. AE Y C + I Y* 12 Add government: G is government spending. T is total taxes. G - T is surplus or deficit.
Background image of page 2
14 Planned expenditures include government spending: AE = C + I + G Consumption drops as taxation rises. C depends on disposable income Y - T. C = 100 + .75 ( Y - T ) 15 Aggregate output with government: AE Y C + I + G Y*
Background image of page 3

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

View Full DocumentRight Arrow Icon
16 Taxation lowers consumption: AE Y C 1 + I C 2 + I 17 Government spending is added: AE Y C 1 + I C 2 + I C 2 + I + G
Background image of page 4
18 Aggregate output with government: AE Y C(T) + I + G Y* 19 Effect of increase in government spending: G rises Y rises.
Background image of page 5

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

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

lec19slides - Aggregate Output with Government Taxation:...

This preview shows document pages 1 - 6. Sign up to view the full document.

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