ECO3041 - Ch 16 Theory and Reality

ECO3041 Ch 16 - FIU Department of Economics Chapter 16 Notes Theory and Reality Prof Dacal Chapter 16 Notes I Policy Tools Here the books looks at

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FIU Department of Economics Chapter 16 Notes Theory and Reality Prof. Dacal
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I. Policy Tools Here the books looks at all the tools available to policymakers for fostering GDP growth. These tools are: Type of Policy Policy Tools Fiscal tax cuts and tax increases changes in government spending Monetary Open-market operation Reserve requirements Discount rate Supply-Side Tax (capital) incentives for investment and saving Deregulation Education and Training Immigration Policy Trade Policy Fiscal Policy Fiscal policy is the use of government taxes and spending to alter macroeconomic outcomes. Fiscal Policy Tools Affect on AD/AS Affects on Price Tax Cut Shifts AD to the right Increase in relative prices Tax increase Shifts AD to the left Decreases in relative prices Increase in government spending Shifts AD to the right Increase in relative prices Decrease in government spending Shifts AD to the left Decreases in relative prices Automatic Stabilizers Automatic stabilizers are federal expenditure or revenue items that respond counter- cyclical to changes in national income. Automatic stabilizers take place automatically and do not require Congressional or Presidential intervention. Automatic changes in taxes and spending do not reflect current fiscal-policy decisions: they reflect laws already on the books. For example automatic stabilizers in an economic slow down leads to: Increase in government spending (unemployment benefit, welfare) Reduction in tax revenue. Widen budget deficits
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This note was uploaded on 01/22/2012 for the course ECO 3041 taught by Professor Dacal during the Fall '11 term at FIU.

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ECO3041 Ch 16 - FIU Department of Economics Chapter 16 Notes Theory and Reality Prof Dacal Chapter 16 Notes I Policy Tools Here the books looks at

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