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Seminar

Seminar. What factors explain the historic changes in GDP indicated by Maddison’s (2007) data?. 08 Fiscal Policy & Defecits. English for economics: Geoff Cockayne 2011. What is fiscal policy?.

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Seminar

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  1. Seminar What factors explain the historic changes in GDP indicated by Maddison’s (2007) data?

  2. 08 Fiscal Policy & Defecits English for economics: Geoff Cockayne 2011

  3. What is fiscal policy? • Government spending and taxation intended to influence aggregate demand (Parkin 2010: 654, Lipsey & Chrystal 2007: 393) • spending on goods and services • infrastructure development, education, health • transfer payments • welfare benefits, regional policy • taxation

  4. Keynesianism • 1930s recession • US: GDP -46%, unemployment 5%>20% • GDP equilibrium below potential • excess saving, reduced consumption • gov’t stimulus • the multiplier • e.g. infrastructure projects = jobs + spending

  5. The multiplier

  6. The Keynesian dilemma • spending stimulates • taxation depresses • thus, defecit spending

  7. Deficit & debt data • defecit1defecit2 • debt • balance of payments • reserves • bond yields - uk

  8. Does debt matter?

  9. References Lipsey,R. & Chrystal, K. (2007) Economics: Eleventh Edition. Oxford: OUP. Maddison, A. (2007) Contours of the World Economy, 1–2030 AD. Oxford: OUP Parkin, M. (2010) Economics: ninth edition. London: Pearson.

  10. Homework • Why does government debt matter? What can be done about it?

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