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Lecture 10

EC140 Lecture Notes - Lecture 10: Money Supply, 1, Production Function


Department
Economics
Course Code
EC140
Professor
Ken Jackson
Lecture
10

This preview shows pages 1-3. to view the full 9 pages of the document.
Chapter 10 - Fiscal policy
Government budgets
federal budget


 
  !
Fiscal policy:
 

"
#$#
%&
Budget making
"%'
()"
%!%

Revenue sources
Personal income taxes
* +%%,-
* )+
!increasing marginal tax rate  
'
* %regressive: 
!caps 
&
* .
/indirect taxes0/10/2

/corporate income tax,

Outlays
3transfer payments: 
-4
Expenditures on goods and services (G)

Debt interest
*debt-service payments (i x D) 5stock
of government debt
* 612budget constraint = G + iD – T
= borrowing
government expenditure = tax revenue
+ borrowing
* #

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.


1in.ation)
Budget Balance
Budget balance = revenues – outlays
Budget surplus: $!78
Budget de/cit:$
* ,12

* 06'

*budget de/cit =
∆ D
= G + iD – T
Balanced budget:6
,05%
9

* +

De/cit and debt
Debt: .:

stock of debt. '
vicious cycle: 

virtuous cycle: 

Debt and capital


!
!'&
Primary de/cit
*

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

primary budget de/cit6:*
610;5:2:560:
+1
$&*2
Actual GDP depends on GDP .ow
<'
'&
<
1210/2
1,
2
=
Supply-side e2ects of /scal policy
">05%!
supply-side e2ects
Actual05%
Potential GDP:4.'
* ( '4
44
Income Tax E2ects on Labour


tax wedge
,>
!1
42
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*
-'
'
'*'



?>
!
@*405%
!
>

Taxes on expenditure and the tax wedge

4

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