ECON 2133 Lecture Notes - Lecture 2: Procyclical And Countercyclical, Aggregate Demand
Document Summary
Fiscal policy - gdp= c + i + g. Us has a property rights, defense, contracts to protect individuals with. G = public sector things promised to them, and a constitution that permits wealth accumulation. Private & public sectors are meant to balance the government and help those in need. Do nothing with business trough, it will return back to normally eventually. If the government predicts what will happen between point a and point b, they can take corrective action at point c to reduce amplitude and periodicity = economic stabilization success or. Active demand management actively try to manage aggregate demand. Countercyclical stabilization policy using expansionary fiscal policy in recessions (cid:523)examples above(cid:524); is done through tax and spending policies (cid:523)(cid:498)step on the gas(cid:499)(cid:524) The stimulus bill - used to try to decrease economic fall, billion of additional spending; lowered social security taxes, delayed tax increases until 2013. Contractionary fiscal policy (cid:498)greece (cid:884)(cid:882)(cid:882)8-(cid:884)(cid:882)(cid:883)(cid:882)(cid:499) as an example: government.
