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Ebook Macroeconomics - A contemporary introduction (8th edition): Part 2

(BQ) Part 2 book "Macroeconomics - A contemporary introduction" has contents: Fiscal policy, federal budgets and public policy, federal budgets and public policy, banking and the money supply, banking and the money supply, international trade, international finance, economic development. | 12 Fiscal Policy PRESIDENT GEORGE W. BUSH AGAIN.” THE JAPANESE TROUBLED ECONOMY. PUSHED THROUGH TAX CUTS TO “GET THE COUNTRY MOVING GOVERNMENT CUT TAXES AND INCREASED SPENDING TO STIMULATE ITS THESE ARE EXAMPLES OF FISCAL POLICY, WHICH FOCUSES ON THE EFFECTS OF TAXING AND PUBLIC SPENDING ON AGGREGATE ECONOMIC ACTIVITY. ROLE OF FISCAL POLICY IN THE ECONOMY? CYCLE? WHAT IS THE PROPER CAN FISCAL POLICY REDUCE SWINGS IN THE BUSINESS WHY DID FISCAL POLICY FALL ON HARD TIMES FOR NEARLY TWO DECADES, AND WHAT BROUGHT IT TO LIFE? DOES FISCAL POLICY AFFECT AGGREGATE SUPPLY? ANSWERS TO THESE AND OTHER QUESTIONS ARE ADDRESSED IN THIS CHAPTER, WHICH EXAMINES THE THEORY AND PRAC TICE OF FISCAL POLICY. IN THIS CHAPTER, WE FIRST EX- PLORE THE EFFECTS OF FISCAL POLICY NEXT, WE BRING AGGREGATE SUPPLY INTO THE PICTURE. THEN, WE EXAMINE THE ROLE OF FISCAL POLICY IN MOVING ©Vince Streano\Corbis ON AGGREGATE DEMAND. THE ECONOMY TO ITS POTENTIAL OUTPUT. PRACTICED SINCE FINALLY, WE REVIEW U.S. FISCAL POLICY AS IT HAS BEEN WORLD WAR II. THROUGHOUT PROGRAMS TO EXPLAIN FISCAL POLICY. THE CHAPTER, WE USE SIMPLE TAX AND SPENDING 252 Part 3 Fiscal and Monetary Policy A more complex treatment, along with the algebra behind it, appears in the appendix to this chapter. Topics discussed include: • • • Theory of fiscal policy Discretionary fiscal policy Automatic stabilizers • • • Lags in fiscal policy Limits of fiscal policy Deficits, surpluses, and more deficits THEORY OF FISCAL POLICY Our macroeconomic model so far has viewed government as passive. But government purchases and transfer payments at all levels in the United States total more than $4 trillion a year, making government an important player in the economy. From highway construction, to unemployment compensation, to income taxes, to federal deficits, fiscal policy affects the economy in myriad ways. We now move fiscal policy to center stage. As introduced in Chapter 3, fiscal policy refers to .