201C11ol - CHAPTER 11 FISCAL POLICY-Can govt spending and...

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CHAPTER 11 - FISCAL POLICY -Can gov’t spending and tax polices help insure full employment? -What policy actions will help fight inflation? -What are the risks of gov’t intervention? -Keynes, considered by many to be the father of macroeconomics, appeared on the cover of TIME magazine (Dec. 31, 1965) 19 years after his death -Keynes felt: too little AD = unemployment too much AD = inflation; in either case the federal gov’t must correct the problems -Excess AD: higher taxes and/or less gov’t spending -Shortfall of AD: lower taxes and/or increase gov’t spending -Gap: measured on the vertical axis (T-58) -Shortfall: measured on the horizontal axis--it is a multiplied amount of the gap (gap x multiplier) -Sixteenth Amendment to the U.S. Constitution (1913) gave the gov’t taxing power to incomes -Income transfers: social security, welfare, unemployment -Fiscal Policy: use of gov’t taxes and spending to impact the economy -Figure 11.1 (T-65) shows that a policy lever--Fiscal policy (taxes, gov’t spending, income transfers, veterans benefits)
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This note was uploaded on 02/22/2011 for the course ECON 201 taught by Professor Hickman during the Spring '11 term at Frederick Community College.

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201C11ol - CHAPTER 11 FISCAL POLICY-Can govt spending and...

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