Transcript Fiscal Policy, Money, Automatic Stabilizers

Fiscal Policy,
Money,
Automatic
Stabilizers
Demand-Side Policies
Designed
to increase
or decrease total
demand
Fiscal Policy
Government’s
attempt to
stabilize the economy
through taxing and
government spending.
Keynesian Economics
Set
of actions designed to
lower unemployment by
stimulating aggregate
demand.
Created by John Maynard
Keynes in 1936.
Keynes
created the
output-expenditure
model: C+I+G+(XM)
Keynes
argued that the
government was the only
thing big enough to
change the budget deficit
through changing their
spending.
Automatic Stabilizers
Programs
that
automatically trigger
benefits if changes
in the economy
threaten income.
3 Main Stabilizers
Unemployment
insurance
Federal entitlement
programs
Progressive income tax
Supply-Side Policies
Policies
designed to
stimulate output and
lower unemployment by
increasing production
rather than demand.
Supply-side
policies
are opposite from
Demand-side policy
(Keynesian
Economics)
Functions of Money
Medium
of exchange: something
accepted by everyone as
payment for goods and services
Measure of value: a common
denominator that can be used to
express worth
Store of value: allows purchasing
power to be saved until needed.
Characteristics of Money
Portability
Durability
Divisibility
Scarcity