The left hand side g t q t t t rb t 1 b t b t 1 when

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the left-hand side: G t + Q t T t + rB t 1 = ( B t B t 1 ) When the government runs a deficit budget, the left-hand side is positive and we will be adding to the stock of public debt. When the government runs a surplus budget, the left-hand side is negative and the stock of debt will fall.
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16 Recap Week 6: One of the powerful arguments for why governments might avoid policies that accumulate a large public debt is: A. prudent securities analysis B. intergenerational equity C. balanced budget multipliers D. diversification of export markets
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17 Recap Week 6: One of the powerful arguments for why governments might avoid policies that accumulate a large public debt is: A. prudent securities analysis B. intergenerational equity C. balanced budget multipliers D. diversification of export markets
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Can be Inflexible Generally only implemented in annual budget Time lag to policy implementation Deficits and public debt Expansionary Fiscal policy => budget deficits and debt Impact on monetary conditions (real interest rate) Demand (and supply) impacts 18
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19 I Recap Week 6: t might be argued that fiscal policy is NOT often used today to stabilise the economy because: A. it may have undesirable long-run effects on the supply side of the economy B. it may have undesirable effects on the planned budget surplus C. it may be ineffective in the long run D. it may have negative effects on monetary policy
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20 It might be argued that fiscal policy is NOT often used today to stabilise the economy because: A. it may have undesirable long-run effects on the supply side of the economy B. it may have undesirable effects on the planned budget surplus C. it may be ineffective in the long run D. it may have negative effects on monetary policy
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The cumulative numbers for the two distributions are then compared to a perfectly equal distribution: The bottom 20% of the population would earn 20% of the total income; the bottom 40% of the population earning 40% of the income, etc. This line is drawn on the graph, and the Gini coefficient can be calculated as: area between the line of equality and the Lorenz curve Gini = total area below the line of equality
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22
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23 Recap Week 6: The Gini coefficient is a(n): A. summary measure of the inflation rate B. summary coefficient of the government's spending C. summary measure of the government's fiscal policy performance D. summary measure of income inequality
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24 Recap Week 6: The Gini coefficient is a(n): A. summary measure of the inflation rate B. summary coefficient of the government's spending C. summary measure of the government's fiscal policy performance D. summary measure of income inequality
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1. Policies to stabilise the Business Cycle - Monetary Policy 2. The supply of money 3. Money and prices 4. The Reserve Bank of Australia Read: Bernanke Chapter 7 25
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Fiscal Policy (annual Budget sets out government’s fiscal policy intentions): Government expenditure Taxes (direct, indirect) Transfer payments Monetary Policy (monthly, Reserve Bank Board) : Set monetary conditions -> interest rates, money supply 26
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27 .
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