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Econ. Feb. 26

Published on Mar 15, 2016

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MORE DECKS TO EXPLORE

PRESENTATION OUTLINE

1.

fiscal policy

mr. melkonian
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2.

economy goes up and downs of business cycle

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3.

should we try to do anything about that?

can we control the swings?
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4.

john maynard keyes

we should manage this - government intervention
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5.

stabilization policies

keep the economy in check
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6.

great depression

7.

investments were low, spending went down

stayed like that for a long time
8.

ww2

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9.

what if government intervenes to change this?

leakages/injections
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10.

leakage

use of income that causes money to be removed from expenditure
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11.

taxes, savings, imports

often times leaked money ends up getting re-spent in the economy
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12.

injection

expenditure that causes money to be put into income-expenditure stream
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13.

government spending, investment spending, exports

consumption is not considered injection - hidden somewhere in injection/leakage
14.

Aggregate demand could be purposely increased in a recession or depression and purposely reduced when excessive demand was leading to inflation.

15.

managing aggregate demand - three categories

fiscal policy, monetary policy, trade policy
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16.

fiscal policy

govt uses spending, taxation, and borrowing to alter the circular flow of the economy
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17.

stimulating greater consumer demand

more emploment, inflationary restraint - whatever is needed
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18.

single biggest way government can influence this?

government spending!
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19.

if people are not spending a lot of money

increase government spending - people will too
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20.

if inflation is getting high

government cuts back on spending - influencing how people will spend
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21.

discretionary fiscal policy

idea that government will spend according to what they think is for the greater good
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22.

expansionary policy

tax cuts, increased government spending, or both
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23.

This will stimulate economic growth and lower unemployment rates.

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24.

taxes are cut

people have more money to spend... hopefully not on savings/imports
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25.

increased government spending

direct effect on aggregate demand - less risky than lower tax
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26.

do both!

MAXIMIZES effect of expansion - greater stimulation
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27.

contractionary policy

inflation and aggregate demand are getting too high
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28.

tax increase, less government spending

goal is to decrease aggregate demand
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29.

changes in government spending

healthcare, welfare, culture, education - standard stuff
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30.

infrastructure

important too! pushing production possibilities curve outwards
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31.

taxation changes

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32.

tax change possibilities

  • raise or lower personal and corporate income taxes and/or sales tax credits
  • alter tax exemptions or tax credits
  • provide special tax incentives for investment (RRSP)
33.

automatic stabilizers

help control aggregate demand without any intervention
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34.

employment insurance/ welfare

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35.

Economy isn't doing so well, people become unemployed. EI pays them to maintain incomes and thus the consumption portion of the GDP formula.

36.

If this goes on for a long period of time, more people get on welfare. Softens blow to aggregate demand - people still spending on stuff

37.

progressive tax

higher your income, the more tax you pay

Peter Melkonian