Macro 22

2. Macroeconomics Lecture 22 Fiscal Policy Chapter 17

3. Questions?

6. Trade War

7. Tariff Rates

8. Tariff Rates

9. Tariff Rates Caused the Great Depression?

10. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Local Supply Local Demand

12. Pizza Tariff

13. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Quantity Pizza Tariff

14. $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

15. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff

18. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza TariffConsumer Surplus

19. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza TariffConsumer Surplus ($10 x 5) ÷ 2 = $25

20. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza TariffConsumer Surplus Producer Surplus ($10 x 5) ÷ 2 = $25

21. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza TariffConsumer Surplus Producer Surplus ($10 x 5) ÷ 2 = $25 ($10 x 5) ÷ 2 = $25

22. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza TariffConsumer Surplus Producer Surplus ($10 x 5) ÷ 2 = $25 ($10 x 5) ÷ 2 = $25 Total Surplus $50

26. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff World Supply

27. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply

32. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply Local 3

33. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply Local 3 Foreign 4

34. 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 Local Supply Quantity Pizza Tariff Local and World Supply Local 3 Foreign 4

35. 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 Local Supply Quantity Pizza Tariff ($14 x 7) ÷ 2 = $49 Local and World Supply Local 3 Foreign 4

36. 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 Local Supply Quantity Pizza Tariff ($14 x 7) ÷ 2 = $49 Local and World SupplyProducer Surplus Local 3 Foreign 4

37. 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 Local Supply Quantity Pizza Tariff ($14 x 7) ÷ 2 = $49 ($6 x 3) ÷ 2 = $9 Local and World SupplyProducer Surplus Local 3 Foreign 4

38. 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 Local Supply Quantity Pizza Tariff ($14 x 7) ÷ 2 = $49 ($6 x 3) ÷ 2 = $9 Total Surplus = $58 Local and World SupplyProducer Surplus Local 3 Foreign 4

39. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply Local 3 Foreign 4

41. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply $2 Tariff

42. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local and World Supply $2 Tariff

43. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff $2 Tariff

44. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff $2 Tariff With Tariff

49. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 $2 Tariff With Tariff

50. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff

51. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff Consumer Surplus

52. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff Consumer Surplus Producer Surplus

53. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff Consumer Surplus Producer Surplus ($12 x 6) ÷ 2 = $36

54. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply 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

55. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply 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

56. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With Tariff

57. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With TariffTariff

58. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With TariffTariff $2 x 2 = $4

61. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With TariffTariff $2 x 2 = $4 $1 x 2 = $2

62. $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 0 1 2 3 4 5 6 7 8 9 10 Demand Local Supply Quantity Pizza Tariff Local 4 Foreign 2 $2 Tariff With TariffTariff $2 x 2 = $4 $1 x 2 = $2

64. Price Quantity Revenue Consumer Surplus Producer Surplus Total Surplus Tariff Deadweight Loss

65. Price Quantity Revenue Consumer Surplus Producer Surplus Total Surplus Tariff Deadweight Loss Local $10 5 $50 $25 $25 $50 $0 $0

66. Price Quantity Revenue Consumer Surplus Producer Surplus Total Surplus Tariff Deadweight Loss Local $10 5 $50 $25 $25 $50 $0 $0 With World $6 7 $42 $49 $9 $58 $0 $0

67. Price Quantity Revenue Consumer Surplus Producer Surplus Total Surplus Tariff Deadweight Loss Local $10 5 $50 $25 $25 $50 $0 $0 With World $6 7 $42 $49 $9 $58 $0 $0 With Tariff & World $8 6 $48 $36 $16 $52 $4 $2

68. Two Objectives

69. Two Objectives Unemployment

70. Two Objectives Unemployment Inflation

72. Chapter 18

73. Chapter 18 Fiscal Policy

74. Chapter 18 Fiscal Policy

75. Price Level Real GDP orY AD-AS Model 18 1917

76. Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply 1917

77. Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 1917

78. Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17

79. Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

80. Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

81. P2 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

82. P2 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

83. P2 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment

84. P2 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment Recession

87. P2 P3 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment Recession

88. P2 P3 Price Level Real GDP orY AD-AS Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment Inﬂation Recession

90. Fiscal Policy

91. Fiscal Policy Using taxes and spending to change

92. Fiscal Policy Using taxes and spending to change Aggregate Demand

93. P2 Price Level Real GDP orY 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17

94. P2 Price Level Real GDP orY 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17 Unemployment

95. P2 Price Level Real GDP orY Increase Aggregate Demand 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17 Unemployment

96. 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 Aggregate Demand 17 Unemployment

97. 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 Aggregate Demand 17 Unemployment

98. 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

99. 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

100. P3 Price Level Real GDP orY 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17

101. P3 Price Level Real GDP orY 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17 Inﬂation

102. P3 Price Level Real GDP orY Decrease Aggregate Demand 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 Aggregate Demand 17 Inﬂation

103. 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 Aggregate Demand 17 Inﬂation

104. 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 Aggregate Demand 17 Inﬂation

105. 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

106. 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

107. Where does government get money?

108. Where does government get money? Crowding Out

109. More Taxes

110. More Taxes Cancel

111. More Taxes Cancel No effect

112. More Borrowing

113. More Borrowing Crowding Out

114. More Borrowing Crowding Out Increase interest rates

115. Lower Taxes

116. Lower Taxes People may just save more and not spend

117. More Spending

118. More Spending Now get free stuff.

119. More Spending Now get free stuff. No new spending

121. Get a free iPhone

122. Get a free iPhone But your taxes will go up to pay for it

123. Get a free iPhone But your taxes will go up to pay for it No change in total spending

124. Tax Rate % $ Tax Revenue Laffer Curve 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

138. 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%

139. Supply Side Tax Changes

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

141. Price Level Real GDP orY 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

142. Price Level Real GDP orY Increase Long Run Aggregate Supply 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17

143. 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

146. 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

147. 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

148. 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

149. Time Lags

150. Time Lags Do you really know?

151. Time Lags Do you really know? Congress approve

152. Time Lags Do you really know? Congress approve Effect lag

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

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

155. Multiplier

156. Multiplier May not be as large as Keynes calculated

158. Multiplier may not multiply

160. Lags

161. Lags Recognize

162. Lags Recognize Legislative

163. Lags Recognize Legislative Implementation

164. Lags Recognize Legislative Implementation Effectiveness

165. Lags Recognize Legislative Implementation Effectiveness Evaluation and Adjustment

166. 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

169. 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

172. 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

173. 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

174. 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

175. 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

176. 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

Macro 22

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Macro 22