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Macro 17
- 3. 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%
- 4. Supply Side Tax Changes Lower marginal tax rates incentivize people to work more and firms to create more.
- 5. 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
- 6. 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
- 7. Time Lags Do you really know? Congress approve Effect lag Take 1- 3 years Counterproductive
- 8. Multiplier May not be as large as Keynes calculated
- 10. Automatic Stabilizers Job Unemployed Job Taxes Insurance Taxes
- 11. Monetary Tools Fiscal Tools Discount Rate Reserve Ratio Open Market Excess Reserve Rate Taxes Spending Aggregate Demand Aggregate Demand Aggregate Supply
- 14. Trade War
- 16. $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
- 17. 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
- 18. $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
- 19. 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
- 22. one unit of this will buy ___ units of that
- 24. Why buy Dollars? Buy American Stuff Invest in America Hold and Hope
- 25. Why buyYuan? Buy Chinese Stuff Invest in China Hold and Hope
- 26. Demand Dollars Yuan Per Dollar Supply Higher U.S. Interest Rate 6.44 6.50 Depreciating Cost more to buy a dollar Losing Value
- 27. Demand Dollars Yuan Per Dollar Supply Lower U.S. Interest Rate 6.44 6.25 Appreciating Cost Less to buy a Dollar Gaining Value
- 34. $5.00 Yuan 20
- 36. $5.00 $3.20