16466 Chapter Notes - Chapter 17: Fiscal Multiplier, Kraljevi Ulice, Procyclical And Countercyclical
Document Summary
Economics for today:macroeconomic policy ii: fiscal policy chapter 17. Key points: discretionary fiscal policy, the balanced budget multiplier, automatic stabilisers, supply side fiscal policy, the federal budget, the countercyclical role of fiscal policy. Implications of the budget outcome for government debt levels. In a period of slow economic growth, policy makers could either: Do nothing and wait for the trade cycle to expand, or. Increase government spending: this expansionary policy would: Initial spending by the government is amplified, as a spending multiplier occurs. Those receiving the money spend some of it on goods and services, which creates a ripple effect: the proportion spent depends on the marginal propensity to consume (mpc), we use this to calculate the spending multiplier. The spending multiplier: assume the mpc is 0. 75, each dollar of expansionary government spending creates 75 cents in extra purchasing power.
