EC140 Chapter Notes - Chapter 22: Unemployment Benefits

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16 Jan 2017
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EC140 Full Course Notes
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Chapter 22: adding government and trade to the simple macro model. Fiscal policy: the use of the government"s tax and spending policies to achieve government objectives. All levels of government (municipal, provincial and federal) must be taken in to account when measuring overall contribution of government to desired aggregate expenditure. The economy"s aggregate expenditure function (on domestic products) must subtract. Im (because those expenditures are on foreign products) Government purchases of goods and services: part of aggregate desired expenditure, the purchases add directly to the demands of the economy"s current output of goods and services, ex. Indirectly affects desired aggregate expenditure: transfer of funds to recipients, ex. Net tax revenue: total tax revenue - transfer payments (t) Positive because transfer payments are smaller than total tax revenues. Varies directly with level of national income: when income rises, people will pay more income tax even though tax rates remain unchanged, when income rises, the government usually reduces transfers to households.

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