ECON102 Lecture Notes - Lecture 6: Potential Output, Real Interest Rate, Transfer Payment
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ECON102 Full Course Notes
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Federal budget = annual statement of the federal government"s outlays and revenues: to finance the activities of the federal government, to achieve macroeconomic objectives. Revenue = personal income taxes + corporate income taxes + indirect taxes + investment income. Outlays = transfer payments + expenditure on goods and services + debt interest. Government debt = total amount that the government borrowing. Fiscal policy = the use of federal budget to achieve macroeconomic objectives (ie. full employment), sustained economic growth, and price level stability: sum of past deficits past surpluses. Supply of labour (cid:1526) tax decreases the after-tax wage rate: ls = labour supply, comes from people, ld = labour demand, comes from firms. An income tax changes full employment and potential gdp. Before-tax real wage rate rises, but after-tax real wage rate falls. Tax wedge = gap between the before-tax and after-tax wage rate.