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PP1001-economicpolicy-lecture7

PP1001-economicpolicy-lecture7 - Economic Policy-Making...

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Economic Policy-Making
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Economic Policy Theories: “Keynesian economics” Liberal approach to economic policy making Government should use its size and resources to put the economy on a positive force When there are signs of recession, government should do something about it (create jobs, raise revenue, jumpstart the economy, etc.) Used by FDR, JFK, George Bush, Barack Obama “Supply-side economics” Conservative approach to economic policy making When government gets involved, things get worse Let the economy take care of itself Let businesses create the jobs to revamp their companies Economic policy in historical perspective Types of economic policy Fiscal Policy: governments’ decisions about where to get money from and how to spend it, controlled by congress Monetary Policy: how government controls the price of money, controlled by the federal reserve
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Fiscal Policy Goal is to avoid, forestall or recover from economic recession Indicators of recession: GDP: total money value of all the goods and services produced in the country CPI: consumer price index, index of prices for goods and services CCI: commodity channel index, identifying cyclical trends in commodities, equities, and currencies, leading indicator Unemployment rate: lagging indicator, total number of people active looking for a job divided by the total number of people active looking for a job plus the total number of people who have a job Stock indexes: average of change in stock prices in a company Budget deficit: total amount of money lost in a year National Debt: accumulation of debt that a country has
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Fiscal Policy Fiscal Policy is made largely through the development and passage
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