Politics

Module 30: Long-run Implications of Fiscal Policy: Deficits and the Public Debt ? Why governments calculate the cyclically adjusted budget balance Why a large public debt may be a cause for concern Why implicit liabilities of the government are also a cause for concern ? Recession ? Expansionary fiscal policy ? Raising government spending/lowering taxes ? Aggregate demand curve shifts to the right Inflation ? Contractionary fiscal policy ? Lowering government spending/raising taxes ? Aggregate demand curve shifts to the left ? The Budget Balance as a Measure of Fiscal Policy Budget Balance: the difference between the government?s tax revenue and its spending in a given year T: value of tax revenues G: government purchases of goods and services

Module 20: Economic Policy and the Aggregate Demand? Aggregate Supply Model How the AD?AS model is used to formulate macroeconomic policy The rationale for stabilization policy Why fiscal policy is an important tool for managing economic fluctuations Which policies constitute expansionary fiscal policy and which constitute contractionary fiscal policy ? ? Economy is self-correcting in the long run: it will eventually trend back to potential output Stabilization policy: is the use of government policy to reduce the severity of recessions and rein in excessively strong expansions ? Policy in the Face of Demand Shocks Monetary and fiscal policy shift the aggregate demand curve