ECN 203 (15), Economic Policy - Chapter 15 -Economic Policy...

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Chapter 15 -- Economic Policy This chapter -- looks at Economic Policy , overt intervention taken to improve a economy currently operating with problems. Economic Policy -- “medicine” given to cure a “sick” economy. Emphasizes Fluctuations Strategy, Get Y* closer to a given Y F .
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Diagnosing the Economy -- A Quick Review Y < Y F -- sluggish economy Y > Y F -- economy with accelerating inflation Y = Y F -- economy with constant inflation rate (desired state)
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Strategies for (Fluctuations) Economic Policy Expansionary Policy -- Policy designed to address a sluggish economy (Y* < Y F ). Contractionary Policy -- Policy designed to address an overstimulated, or accelerated inflation economy (Y* > Y F ).
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Types of Economic Policy Monetary Policy -- The Federal Reserve changing the supply of financial capital to promote investment (and possibly durable goods consumption). Fiscal Policy – The Federal Government changing the government budget position (G-T). Trade Policy -- Trying to managing the economy though changing exports (X) and imports (M).
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of Economic Policy Intent -- to move Y* closer to Y F . Expansionary Policy (policy for Y* < Y F ), seeks to increase spending on goods and services , or shift the AD curve rightward . Contractionary Policy
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ECN 203 (15), Economic Policy - Chapter 15 -Economic Policy...

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