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Intro to Econ Week 10

by: Katie Truppo

Intro to Econ Week 10 Econ 201

Katie Truppo
GPA 3.4

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Economic growth
Into Economics: Survey Course
Kenneth Baker
Class Notes
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This 2 page Class Notes was uploaded by Katie Truppo on Saturday August 20, 2016. The Class Notes belongs to Econ 201 at University of Tennessee - Knoxville taught by Kenneth Baker in Fall 2015. Since its upload, it has received 4 views.


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Date Created: 08/20/16
Economic Growth I Using Fiscal Policy to Smooth Growth (White House/Congress) Long Run Stabilization Macroeconomic stabilization is very controversial The involvement of public policy into the workings of the economy How does this affect our economy (P, U, Y) in the long run? Shifts in AD will have no long run effect on the economy (except P) Short Run Stabilization How does this affect our economy (P, U, Y) in the short run? Employment Act of 1946 Obligates the government and Fed to keep put high and unemployment low Implies an active role in macroeconomic policy John Maynard Keynes (1883-1946) The General Theory of Employment, Interest, and Money The long run is a misleading guide Fiscal Policy Manipulation by the government (Congress and/or White House) of the AD or AS in order to achieve a macroeconomic goal 1. Automatic Fiscal Policy: acts on its own (tax system and social welfare payments) 2. Discretionary Fiscal Policy: explicitly enacted by White House to manipulate the AD Demand-Side AD Fiscal Policy Expansionary AD Fiscal Policy Policies to shift AD right Decrease tax rates Increase government spending Goal: speed economy up Contractionary AD Fiscal Policy Policies to shift AD to the left Increase tax rates Decrease government spending Goal: slow economy down Multiplier effect: AD shifts by more than the original change in G Marginal Propensity to Consume (MPC): how much of an extra dollar that households spend (not save) Marginal Propensity to Save (MPS): how much of extra dollar that households save AD Multiplier= 1/(1-MPC) or 1/MPS


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