ECO102H1 Chapter Notes - Chapter 13: Ricardian Equivalence, Precautionary Statement, Government Debt
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ECO102H1 Full Course Notes
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Ex: diagnostic equipment for hospitals, salaries of public school teachers, etc. Payments by the government to households for which no good or service is provided in return. In canada, most transfer payments cover two broad areas: Public pension plans, which provide guaranteed income to older canadians, disabled canadians, and the surviving spouses and dependent children of deceased or retired beneficiaries. Other social assistance payments, which help individuals and families to maintain an acceptable level of earnings. Social insurance: government programs intended to protect families against economic hardship. Disposable income equals to the total income they receive from wages, dividends, interest, and rent, minus taxes, plus government transfers. Either an increase in taxes or a reduction in government transfers reduces disposable income. Fall in disposable income, other things equal, leads to a fall in consumer spending. Government can use changes in taxes or government spending to shift the aggregate demand curve. Expansionary fiscal policy: fiscal policy that increases aggregate demand.
