ECON 102 Lecture 17: Fiscal Policies
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Econ 102 - principles of macroeconomics - chapter 29 (lecture 17): fiscal policies. Keynesian model: affecting aggregate expenditure and multiplier. We can bring influence the economy (for example, bring it out of a recession) by implementing fiscal and monetary policies. Discuss within the context of aggregate expenditure and multiplier. By principle, increasing g and decreasing t will both increase consumption(c) and thus bring about an increase in aggregate demand and gdp. We can answer this question by seeing how the ad equation change as g and t change. Ae = c + i + g + (x - m) We must think of a way to plug t into the equation. The previous equation is a simplified version of the equation. The real equation: ae = co + cy + i(r) + g + (x - (mo + my)) Co = autonomous consumption (life"s necessities that people will buy no matter what their income is)
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