ECON 2105 Lecture Notes - Lecture 11: Automatic Stabilizer, Fiscal Multiplier, Parsec
7 Apr 2017
School
Department
Course
Professor
Document Summary
Econ 2105 - lecture 11: keynesian fiscal policy and the multipliers. Stock market crashed in 1929, followed by waves of bank failures: the fed did little to help. Role of monetary policy: real interest rates were high while nominal interest rates were close to zero, couldn"t lower interest rates any further; basically the fed is powerless in deflation. Keynes plan for ending the great depression: increase government spending because no other sectors (household, businesses) will increase spending, cut taxes. Employment act of 1946: required fiscal policy to be used to promote maximum employment, production, and purchasing power . Critics: government often acts too late to be effective, chronic deficits argue against tax cuts, Federal reserve is more qualified to make economic decisions. Revival of fiscal policy: worldwide stimulus bills used in 2009 recession: u. s. : 1/3 tax cuts, 1/3 aid to states, 1/3 spending = billion stimulus.
