The document discusses fiscal policy and the tools governments use to influence economic outcomes like output, employment, and prices. It explains how governments can use spending, taxes, and transfers to shift aggregate demand curves to stimulate a weak economy or apply restraint to an overheating one. The challenges of time lags, crowding out effects, and political pressures that influence effective fiscal policy implementation are also covered.
"Keynesians in the White House" Economics Case studyNikhil Gupta
This case study is a part of cirriculum of Macro economics. This Presentation will give the idea of John Maynard Keynes General Theory which is to use the Fiscal Policy to control the Aggregate Demand of the Economy. The case deals about President Kennedy's proposal of Tax Cuts.
Information on Fiscal Policy including that of the impact on AD and the Economics Objectives or Inflation, Economic Growth, Unemployment and Balance of Payments
"Keynesians in the White House" Economics Case studyNikhil Gupta
This case study is a part of cirriculum of Macro economics. This Presentation will give the idea of John Maynard Keynes General Theory which is to use the Fiscal Policy to control the Aggregate Demand of the Economy. The case deals about President Kennedy's proposal of Tax Cuts.
Information on Fiscal Policy including that of the impact on AD and the Economics Objectives or Inflation, Economic Growth, Unemployment and Balance of Payments
Government Spending content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class.
Subtopics
Intro to Government Spending
Determinants of Government Spending
8. Fiscal Policy Internal market forces External shocks Policy tools: Fiscal policy Output Jobs Prices Growth International balances DETERMINANTS OUTCOMES AD AS
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10. The Policy Goal The goal is to close GDP gaps AS Q E = 5.6 a AD 1 P E Price Level Real GDP 6.0 = Q F GDP Equilibrium Full-employment GDP b GDP gap
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14. The AD Shortfall Recessionary GDP gap AD shortfall The AD shortfall is the fiscal policy target for achieving full employment. AS Q E = 5.6 a AD 1 AD 2 P E Price Level Real GDP Q F = 6.0 6.4 AD 3 c d b e
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17. Multiplier Effects Real GDP Price Level P 1 5.6 Q E 5.8 6.4 AD 2 AD 3 Current price level Direct impact of rise in government spending + $200 billion AD 1 a b Indirect impact via increased consumption + $600 billion
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21. The Tax Cut Multiplier First round of spending: Second round of spending: Third round of spending: More income More consumption More income More consumption Tax Cut More consumption = MPC X tax cut More saving = MPS X tax cut More saving More saving Cumulative change in saving: = tax cut
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27. Excess Aggregate Demand Inflationary GDP gap Excess AD AD must shift by more than the GDP gap AS Q 2 = 5.8 E 2 f AD 1 AD 2 P E P F Price Level Real Output E 1 Q F = 6.0 Q 1 = 6.2
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