Macro 18

2. Lecture 16
Macroeconomics

3. Opening
Prayer

4. Quiz Master

7. 915,103,765

8. GDP
= C + I + G + X - M

9. If there are inactive capitals
Output will increase
If all capitals are active
Prices will increase

10. Tax Rate %
$
Tax
Revenue
Laffer Curve
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Dropped Top Marginal Income
Tax Rate
from 70% to 28%

12. Supply Side Tax
Changes
Lower marginal tax rates
incentivize people to
work more and firms to
create more.

13. P3
Price
Level
Real GDP orY
Increase Long Run Aggregate Supply
Lower Marginal Tax Rates
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
Lower Prices
Increase
Output

14. Time Lags
Do you really know?
Congress approve
Effect lag
Take 1- 3 years
Counterproductive

15. Spending more than Tax
Revenue
Budget De
fi
cit
Borrow to Spend
IOUs
U.S. Government
Bonds

16. If the the public loans money to the
government, no change in money supply.
If the Central Bank loans money to the
government, it may increase the money
supply
Inflation

17. U.S. Government
Fiscal Policy
Central Bank
Monetary Policy
I.O.U.

18. U.S. Government Bonds
IOUs
Federal Reserve Bank
Printing Currency

19. Ability to Pay
Who Should Pay the Taxes?
Benefits
Depends on your definition of
fairness

20. You
Which Country?
Everyone else
A. $30,000 $30,000
B.
C.
$60,000 $100,000
$20,000 $10,000