ECO100Y5 Chapter Notes - Chapter 6: Fiscal Policy, Business Cycle, Invisible Hand
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ECO100Y5 Full Course Notes
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Macroeconomics is diferent from micro because it focuses on economy as a whole. Paradox of thrit when families and businesses worried about depression, they lower spending which inevitably makes the economy worse of. Self-regulaing economy problems such as unemployment are solved without government intervenion, through the invisible hand . That government intervenion will most likely just make things worse. According to keynesian economics, depressed economy is result of inadequate spending. Keynes also argued that government intervenion can help depressed economy through monetary policy and iscal policy. Monetary policy uses changes in the quanity of money to alter interest rates and afect overall spending. Fiscal policy uses changes in government spending and taxes to afect overall spending. Recession periods of economic downturn when output and employment are falling. Expansion period of economic increase when output and employment are rising. Business cycle the alternaion between recessions and expansions. Business cycle peak economy goes from expansion to recession.
