ECON 1 Study Guide - Final Guide: Loanable Funds, Canada Health Transfer, Inflation Targeting
Document Summary
How aggregate expenditure is affected due to the change in fiscal policy. Incorporate fiscal policy in the income-expenditure model. Discuss how fiscal policy acts as an automatic stabilizer and its effectiveness in stabilizing fluctuations in output. Any other topics regarding fiscal policy, budget balance and national debt. Fiscal policy : how the government decides their levels of spending, taxes and transfers. Composed of 3 components: spending, taxes and transfers. We pay taxes to all three levels of government. The relationship between government budget and total spending. National income identity : gdp = c + i + g + x - im = ae planned. Direct effect : when there are changes in the government"s decisions on spending, aggregate expenditure changes. Indirect effect : changes in taxes and government transfers affect aggregate expenditure. Changes in taxes and government transfers also changes disposable income for households ( yd = y - t + tr) and a change in consumption.
