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Macro 17

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Gale Pooley
Gale Pooley

The document discusses several topics: - Three classes being offered: English 316, Math 119, and Political Science 190. - The Laffer curve shows the relationship between tax rates and tax revenue. Lowering marginal tax rates from 70% to 28% is mentioned. - Supply-side tax changes are discussed, noting lower marginal tax rates can incentivize more work and business creation. - International trade topics are presented, including a comparison of consumer and producer surplus with and without a tariff. The tariff is shown to reduce total surplus and create deadweight loss.

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Lecture 17 Macroeconomics
Extra Credit Opportunities Movie and Popcorn Wednesday June 12 Thursday June 20
Three Classes English 316. Technical Writing Math 119. Applied Calculus Political Science 190. Foundations of Critical Thinking
Three Classes English 316. Technical Writing Math 119. Applied Calculus Political Science 190. Foundations of
Three Classes English 316.Technical Writing Math 119.Applied Calculus Political Science 190. Foundations of Critical Thinking
Get a free iPhone But your taxes will go up to pay for it No change in total spending
Where does government get the money?
GDP = C + I + G + X - M
If there are inactive capitals Output will increase If all capitals are active Prices will increase
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%
Supply Side Tax Changes Lower marginal tax rates incentivize people to work more and firms to create more.
P4 Price Level Real GDP orY Fiscal Policy and Negative Supply Shock 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 P2 P3 Inflation and Recession Stagflation
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
Time Lags Do you really know? Congress approve Effect lag Take 1- 3 years Counterproductive
Multiplier May not be as large as Keynes calculated
Automatic Stabilizers Job Unemployed Job Taxes Insurance Taxes
Chapter 19 International Trade
Trade War
$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Quantity Consumer Surplus Producer Surplus ($10 x 5) ÷ 2 = $25 ($10 x 5) ÷ 2 = $25 Total Surplus $50
Consumer Surplus $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Quantity ($14 x 7) ÷ 2 = $49 ($6 x 3) ÷ 2 = $9 Total Surplus = $58 Producer Surplus Local 3 Foreign 4
$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff Consumer Surplus Producer Surplus ($12 x 6) ÷ 2 = $36 ($8 x 4) ÷ 2 = $16 Total Surplus $52 Tariff $2 x 2 = $4 $1 x 2 = $2
Local With World With Tariff & World Price $10 $6 $8 Quantity 5 7 6 Revenue $50 $42 $48 Consumer Surplus $25 $49 $36 Producer Surplus $25 $9 $16 Total Surplus $50 $58 $52 Tariff $0 $0 $4 Deadweight Loss $0 $0 $2

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