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Supply-side economics

Questions on Chapter 18: Economic Policy

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Roman Caposino March 6th, 2014 Chapter 18 #1-5 AP Government & Politics When the economy is thriving, the government tends to spend more money. Unfortunately, when the economy is not thriving, or even if it is, the government still spends way more money than it makes, creating a huge deficit. Generally, voting behaviors of politicians and economic conditions are not always correlated, both at national and local levels. Politicians do not vote within their spending limit sometimes, because they know the federal government will pay for their deficit.

Macroeconomics Formula Sheet

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Inflationary Gap: At Capacity, The difference between Planned Expenditure and Agg. Output (rise in price not met with rise in Y) Causes of Inflation: Demand Pull ? initiated by MD? Cost Push/Supply-Side ? caused by ?Costs and ?Supply Stagflation- Causes both Y? P? - BAD NEWS Expectations: Of price increases cause companies to collectively pre-empt by increasing prices causing the real price to rise Monetary/Fiscal: Expansionary monetary/Fiscal policy at capacity will also push up AD causing inflation Lags: Recognition, Implementation -much longer for Fiscal Policies, Response - time it takes for the economy to adjust after implementation- much longer for Monetary Policies)
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