Class Notes (888,697)
CA (531,706)
UOttawa (34,551)
ECO (987)
ECO1102 (278)
David Gray (103)
Lecture 6

ECO1102 Lecture 6: Week 7_ March 2&7

4 Pages

Course Code
David Gray

This preview shows page 1. Sign up to view the full 4 pages of the document.

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
March 7 Fiscal policy Should fiscal policy be used to stabilize the economy? Should govt wait for the economy to correct itself or should it use fiscal policy to stabilize the economy? Problem 1: Fiscal policies are often educated guesses Problem 2: Time lags between the problems Are identified Information lag: understanding the current economy When policies are chosen Analysis lag: deciding on the appropriate policy When policies are implemented Formulation lag: passing the required legislation When policies take effect Implementation lag: affecting the economy Often cause fiscal policy to be ineffective or even harmful Automatic stabilizers Automatic stabilizers are changes in taxes or govts spending that offset economic fluctuations without policymakers having to take deliberate action Stimulate AD when the economy contracts Dampen AD when the economy expands Examples: Taxes fall automatically in recessions as incomes falls, which prevents AD from contracting as much The progressive nature of income taxes means that higher tax rates apply as earnings rise, which puts a check in overall spending and AD In recessions, more people apply for public assistance so that govt spending Discretionary fiscal policy Policymakers can also use discretionary fiscal policy to respond to economic conditions Information, analysis, formulation and implementation lags can reduce the effectiveness of such policy Discretionary policy may be used when automatic stabilizers are unsuccessful in correcting the economy Eg: Politicians may cut taxes in response to recessions But tax cuts are not free because govt must find a way to make up for the lost tax revenue Ricardian equivalence predicts that people will not change their behaviour (AD will not increase) if there are tax cuts but no decrease in spending
More Less
Unlock Document
Subscribers Only

Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
Subscribers Only
You're Reading a Preview

Unlock to view full version

Unlock Document
Subscribers Only

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.