ECON 209 Lecture Notes - Canadian Dollar, Unemployment Benefits, Stabilization Policy

• School: McGill University
• Department: Economics (Arts)
• Course: ECON 209
• Professor: Mayssun El- Attar Vilalta

Document Summary

Gov"t fiscal policy (use of gov"ts tax and spending policies to achieve gov"t objectives) Gov"t purchase: something adding directly to demands for economy"s current output of goods and services (office supplies, hiring a bureaucrat) Transfer payments: indirectly affects economy (for ex: welfare or employment insurance)-transfer payments from taxpayers to recipients. Transfer payments aren"t included in ae until the recipient spends the money on something, their consumption is part of ae; only impact is through the recipients disposable income. Taxes reduce household disposable income; transfer payments raise disposable income (all relative to national income) Net taxes- total tax revenue minus transfer payments denoted t. Net tax revenue is positive b/c transfer payments are smaller than total tax revenues. Therefore disposable income is substantially less than national income. Tax revenues: t= t y (t is net tax rate or marginal propensity to tax) Net tax rate: increase in net tax revenue generated when national income rises by one dollar.