Fiscal Policy. Fiscal policy Changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives , such as high employment, price stability, and high rates of economic growth . Automatic Stabilizers versus Discretionary Fiscal Policy.
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Fiscal policy Changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives, such as high employment, price stability, and high rates of economic growth.
Automatic Stabilizers versus Discretionary Fiscal Policy
Automatic stabilizers Government spending and taxes that automatically increase or decrease along with the business cycle.
The Federal Government’s Share of Total Government Expenditures, 1929–2008
Federal Purchases and Federal Expenditures as a Percentage of GDP, 1950–2008
Federal Government Expenditures, 2008
Federal Government Revenue, 2008
The Federal Budget Deficit, 1901–2009
The Federal Government Debt
The Federal Government Debt, 1901–2006
Will the federal government be able to keep the promises made by the Social Security and Medicare programs?
Looks a lot like expansionary and contractionary monetary policy
…except for impacts on interest rates and investment spending
A Summary of How Fiscal Policy Affects Aggregate Demand
Countercyclical Fiscal Policy
Don’t Let This Happen to YOU!Don’t Confuse Fiscal Policy and Monetary Policy
The Multiplier Effect and Aggregate Demand
The Multiplier Effect of an Increase in Government Purchases
This spending multiplier is analogous
but not the same as the deposit multiplier
Taking into Account the Effects of Aggregate Supply
The Multiplier Effect and Aggregate Supply
An Expansionary Fiscal Policy Increases Interest Rates
Crowding Out in the Short Run
The Effect of Crowding Out in the Short Run
Although government spending increased during the Great Depression, the cyclically adjusted budget was in surplus most years.
Cyclically adjusted budget
deficit or surplus