MGMT100 Lecture 4: week 4
Document Summary
Fiscal policy involves changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives. If a gov"t spends more or taxes less, aggregate demand rises, boosting output and lowering unemployment. Because of the multiplier effect, an increase in government purchases or a cut in taxes will have a multiplied effect on equilibrium real gdp. Poorly timed fiscal policy can do more harm than good. May not increase demand in the long term. May crowd out" the private sector, as interest rate rises. A budget deficit occurs when the federal government"s expenditures are greater than its tax revenues. A budget surplus occurs when the federal government"s expenditures are less than its revenues. In australia monetary policy refers to the actions taken by the reserve bank of. Australia (rba) to manage interest rates to pursue macroeconomic objectives. Since the early 1990"s the rba"s primary goal has been to control inflation.
