ECON103 Lecture Notes - Lecture 14: Government Spending
14 Mar 2016
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Lecture 14 fiscal policy & the national debt. Bush & obama both had stimulus packages in an attempt to stimulate the economy, but this also expanded the deficit. There can still be a deficit at full employment just depends where full employment falls on rgdp line. There is no guarantee that people will immediately spend their stimulus money they may hold on to it. National debt accumulated deficits over all the years what"s been paid back. Good debt vs. bad debt can"t make a judgement based purely from amount of debt: must know what the debt is for, and what the person"s financial/income situation is. High levels of debt affected by inflation putting it in real terms softens the debt. Real debt is relatively consistent with rgdp. Our ability to pay debt back is a function of our production of goods and services. Debt : gdp ratio real debt/rgdp. Crowding-out effect government spending increases and we"re stuck in deficit.
