ECO100Y5 Chapter Notes - Chapter 22: Disposable And Discretionary Income, United States Treasury Security, Consumption Function
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ECO100Y5 Full Course Notes
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Chapter 22- adding government and trade to the simple macro model. 22. 1 introducing government: fiscal policy- the use of the government"s tax and spending policies to achieve government objectives. Government purchases: desired government purchases, g, are part of aggregate desired expenditure. Government hires public servant, buys office supplies, purchases fuel for. Canadian forces, etc adding directly to demands of economy"s current output of g/s: transfer payments also affect aggregate desired expenditure but only indirectly. Welfare, employment insurance benefits, etc place no direct demand on nation"s production of g/s since they merely transfer funds to the recipients. Government transfer payments do affect aggregate expenditure but only through the effect these transfers have on households" and firms" spending. Level of government purchases, g, is autonomous with respect to level of national income: as gdp rises/falls, level of government transfer payments will generally change, but we assume that g does not automatically change just because gdp changes.
