levels Labor Sector highlights the rates of pay Also concerned with the rate of

Levels labor sector highlights the rates of pay also

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levelsLabor Sector – highlights the rates of payAlso concerned with the rate of employment and unemploymentMacroeconomics is most concerned Monetary Sector – focuses on the interest ratesAlso highlights the economy’s money supplyRespond quickly to shocks, because thousands are waiting to make money based on pricing changesAssumed that these sectors can quickly equilibrializeActivity in this sector affects the goods and services sector by affecting wage levels and price levelsInternational Sector – emphasized the exchange rateAlso focuses on the balance of paymentsRespond quickly to shocks, because thousands are waiting to make money based on pricing changesAssumed that these sectors can quickly equilibrializeActivity in this sector affects the goods and services sector by affecting wage levels and price levelsLaffer Curve – represents the governmental tax rate that will best maximize tax revenues.Arthur Laffer, economist who believed in trickle-down economics
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oUsed this curve to illustrate the increasing taxes would not always increase revenuesBasic idea is that neither a % or 100% tax rate will result in any tax revenueLorenz Curve – used to demonstrate shifts in income distribution among a population over timeCan be used to show income inequalitiesPositive Analysis of Macroeconomic Policy – stating that a tax increase will likely lead to lower interest rates Only concerned with the economic consequences of a particular actionNot the feelings or values associated with the actionNormative Analysis – statement that congress should increase taxes to reduce interest rates Generally concerned with whether or not a policy change should be madeTypically come with the bias of the person doing the analysisCongressional Budget Office (CBO) – government office responsible for projecting federal surpluses and deficitsNon partisan group responsible for providing congress with the facts and statistics on the federal budgetFractional Reserves Banking Systems – most free-market banking systemsBanks keep fraction of the deposits they receive in reserve (liquid) and lend out the remainderThey have an obligation to redeem all deposits upon demand100% Reserve Banking Systems - requires banks to keep all deposits on hand and ready for withdrawalAn increase in government spending will lead to an increase in aggregate demandGovernment spending is one of 4 components of aggregate demandDemand-Side Fiscal Policy – these policies cut taxes on the middle and lower class in order to stimulate spending in the economy, increase job creation, and decrease inflationUsed following the Great DepressionTheory behind demand-side economics is that working class people often spend all of their income, so by lowering taxes on the lower and middle classes, workers will have more money left in their pockets to spend in the economyWorked to expand and grow the U.S. in the mid and late 1990s
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