ECON 2D03 Lecture Notes - Lecture 11: Aggregate Demand, Government Spending, Redistribution Of Income And Wealth
Document Summary
Encourage reduced consumption: good source of gov"t tax revenue. Impact of the tax- felt by producers and consumers: consumers- higher prices paid for the product, producers lower profits. Generally, consumers bear a large share of the burden of the gasoline excise tax. Higher rent: burden of the tax- both, a portion of property taxes is passed along to renters. At some specified point in the future, the buyer will receive his money back, plus interest. Expands the economy more than gov"t spending financed through increased taxes. Effects of the gov"t borrowing on the macroeconomy. Increased spending through borrowing: aggregate demand curve shifts forward. Increased spending through taxes: aggregate demand curve shifts backwards, very little expansion of the economy. Bond owners: middle or upper income people. If repaid from taxes- more income inequality: to the extent that low-income people receive greater benefit from interest receipts, income redistribution occurs from the poor to the rich.
