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Macro 12

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Gale Pooley
Gale Pooley

Macro 12

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Macroeconomics Lecture 12 Fiscal Policy
Questions
Video Project Must be original Can be inspired Plagiarism Honor Code
Fiscal Policy Taxes Expenditures
Two Objectives Unemployment Inflation
P2 P3 Price Level Real GDP orY Modern Keynes Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment Inflation
Spending Taxes Aggregate Demand Expand Increase Decrease Right Contract Decrease Increase Left Fiscal Policies
P2 Price Level Real GDP orY Increase Aggregate Demand Lower Taxes and/or Increase Spending 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment
P3 Price Level Real GDP orY Decrease Aggregate Demand Raise Taxes and/or Decrease Spending 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Inflation
Spending Taxes Aggregate Demand Expand Increase Decrease Right Contract Decrease Increase Left Fiscal Policies
Where does government get money? Crowding Out
More Taxes Cancel No effect
More Borrowing Crowding Out Increase interest rates
Lower Taxes People may just save more and not spend MPS increases
More Spending Now get free stuff. No new spending
Get a free iPhone But your taxes will go up to pay for it No change in total spending
Tax Rate % $ Tax Revenue Laffer Curve 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Supply Side Tax Changes Lower marginal tax rates incentivize people to work more and firms to create more.
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

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