CH07FISCAL POLICY打印稿.PPT

1、1,CH07 FISCAL POLICY,2,Refers to changes in government expenditures and/or taxes to achieve particular economic goals, such as low unemployment, price stability, and economic growth. Government expenditures is the sum of government purchases and transfer payments,FISCAL POLICY,3,FISCAL POLICY,Fiscal

2、 policy influences saving, investment, and growth in the long run. In the short run, fiscal policy primarily affects the aggregate demand. When policymakers change the money supply or taxes, the effect on aggregate demand is indirectthrough the spending decisions of firms or households. When the gov

3、ernment alters its own purchases of goods or services, it shifts the aggregate-demand curve directly,4,Changes in Government Purchases,There are two macroeconomic effects from the change in government purchases: The multiplier effect The crowding-out effect,5,The Multiplier Effect,Government purchas

4、es are said to have a multiplier effect on aggregate demand. Each dollar spent by the government can raise the aggregate demand for goods and services by more than a dollar. The multiplier effect refers to the additional shifts in aggregate demand that result when expansionary fiscal policy increase

5、s income and thereby increases consumer spending,6,The Multiplier Effect,Quantity of,Output,Price,Level,0,Copyright 2004 South-Western,7,A Formula for the Spending Multiplier,The formula for the multiplier is: Multiplier = 1/(1 - MPC) If the MPC is 3/4, then the multiplier will be: Multiplier = 1/(1

6、 - 3/4) = 4 In this case, a $20 billion increase in government spending generates $80 billion of increased demand for goods and services,8,The Crowding-Out Effect,Fiscal policy may not affect the economy as strongly as predicted by the multiplier. An increase in government purchases causes the inter

7、est rate to rise. A higher interest rate reduces investment spending. This reduction in demand that results when a fiscal expansion raises the interest rate is called the crowding-out effect. The crowding-out effect tends to dampen the effects of fiscal policy on aggregate demand,9,The Crowding-Out

8、Effect,Quantity,of Money,Quantity fixed,by the Fed,0,Interest,Rate,Money demand,MD,Money,supply,a) The Money Market,Quantity,of Output,0,Price,Level,Aggregate demand, AD1,b) The Shift in Aggregate Demand,Copyright 2004 South-Western,10,Changes in Taxes,When the government cuts personal income taxes,

9、 it increases households take-home pay. Households save some of this additional income. Households also spend some of it on consumer goods. Increased household spending shifts the aggregate-demand curve to the right,11,Automatic Stabilizers,Automatic stabilizers are changes in fiscal policy that sti

10、mulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action. Automatic stabilizers include the tax system and some forms of government spending. Examples: income tax unemployment insurance welfare,12,Discretionary Fiscal Policy,Discretiona

11、ry Fiscal Policy is deliberate changes of government expenditures and/or taxes to achieve particular economic goals. Automatic Fiscal Policy is changes in government expenditures and/or taxes that occur automatically without (additional) congressional action,13,Discretionary Fiscal Policy,Expansiona

12、ry fiscal policy refers to increases in government expenditures and/or decreases in taxes to achieve macroeconomic goals. Contractionary fiscal policy attempts to decrease government expenditures and/or increases in taxes to achieve macroeconomic goals,14,Fiscal Policy and Full Employment,P1,Y1,P,Re

13、al GDP,During a recession, the government can stimulate the economy by increasing government spending or decreasing taxes,AD1,AD2,Yp,LRAS,SRAS,P2,15,Fiscal Policy and Price Stability,P2,Yp,P,Real GDP,During an inflationary period, the government can contract the economy by decreasing government spen

14、ding or increasing taxes,AD2,AD1,Y1,LRAS,SRAS,P1,16,Two Key Assumptions,In our discussion of fiscal policy, we only deal with discretionary fiscal policy. We assume that any change in government spending is due to a change in government purchases and not to a change in transfer payments,17,Demand-Si

15、de Fiscal Policy,A change in consumption, investment, government purchases, or net exports can change aggregate demand and there fore shift the AD curve. A change in taxes can affect consumption or investment or both and there for can affect aggregate demand,18,Factors That Change Aggregate Demand,1

16、9,Fiscal Policy: A Keynesian Perspective,20,Keynesian Theory the amount of money they can earn by working increases. In the analysis of marginal tax rates and aggregate supply, we implicitly assume that in the aggregate, a marginal tax rate cut increases work activity,28,The Predicted Effect of a Pe

17、rmanent Marginal Tax Rate Cut on Aggregate Supply,29,The Laffer Curve: Tax Rates and Tax Returns,If income tax rates were lowered, would it increase or decrease tax revenue? There are two tax rates at which zero tax revenues will be collected 0 and 100%. An increase in tax rates could cause tax reve

18、nues to increase. A decrease in tax rates could cause tax revenues to increase. Tax revenues = (Tax base) x (the average Tax rate,30,The Laffer Curve: Tax Rates and Tax Returns,31,The Laffer Curve: Implications,We assume that as the tax rate is reduced, the tax base expands. The rationale is that individuals work more, invest more, and enter into more exchanges, and shelter less income from taxes and lower tax rates. How much does the tax base expand following the tax rate reduction? Tax revenues increase if a tax reduction is made in the do