econ101fall11lecture11

econ101fall11lecture11 - Model Y E E C I G C C bTX bTR b(1...

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Model -( 1 - ) YE ECIG CC b T X b T R b t Y II GG 
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Assumptions • Closed Economy • Completely Slack Conditions: Flat AS Curve • No Wealth Effects on Consumption
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Expenditure Schedule Effective Intercept Slope -( 1 - ) 1 - ) ECIG Cb T X b T R b t Y I G T X b T R I G b t Y  
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Graph: Expenditure Schedule
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Market Equilibrium
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Fiscal Instruments • Tools of Fiscal Policy—What the government controls • Fiscal Instruments: • NB: Government does not control tax revenue , GT X T R t TX tY 
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Examples of Fiscal Policies • $30 billion increase in military spending • $30 billion increase in Social Security Benefits • $30 billion tax cut in autonomous taxes: e.g., $500 per child tax credit (independent of Y) $30 TR TR bill  $30 G G bill $30 TX bill 
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Other Examples of Fiscal Policies • Reduction in the Marginal Tax Rate • Done in Section Meeting
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Increase in Military Spending: G
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A Tax Cut: TX
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Increase in Social Security Benefits: TR
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Qualitative Principle  , , or all . Called Fiscal Policies . Called Fiscal Policies Qualitatively Expansionary Contractionary GT RT X t Y R T X t Y  
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Quantitative Effects  Changes in affect Changes in or or only affect by affecting and thus Gives rise to important differen e cs directly indirectly quantitative dis GE TX t TR E YC
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This note was uploaded on 01/12/2012 for the course ECON AS.180.101 taught by Professor Maccini during the Fall '08 term at Johns Hopkins.

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econ101fall11lecture11 - Model Y E E C I G C C bTX bTR b(1...

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