第34章货币政策和财政政策对总需求的影响.pptVIP

This exercise gets students to apply the preceding material on the effects of fiscal policy on aggregate demand. Finding the answers requires students use the formula for the multiplier but does not require that students understand the algebraic derivation of this formula. * This slide and the next discuss material from the FYI box entitled “How Fiscal Policy Might Affect Aggregate Supply.” These two slides may be omitted without loss of continuity. The tax rate cut, other things equal, would reduce government revenue. But other things aren’t equal: as the textbook explains, the rightward shift in AS increases income, which, in turn increases the tax base. Some supply-siders believe that the increase in income and the tax base are so large that a tax rate cut ends up INCREASING tax revenue rather than decreasing it. This is a theoretical possibility but does not have much empirical support. Most economists and policymakers believe that a tax rate cut causes revenue to fall, even if it stimulates additional economic activity. There’s a very nice discussion of supply-side economics and the Laffer Curve toward the end of the chapter entitled “Application: The Costs of Taxation.” This chapter appears as Chapter 8 in every version of the textbook except Brief Principles of Macroeconomics (which omits it in the name of being – you guessed it – brief). * Other examples of public capital for which this effect might be relevant: bridges, and human capital expenditures such as public education or subsidies for college education. * This slide covers a Case Study in the chapter. Of course, there are lots of other examples of Keynesians in the White House. President Reagan (who believed himself a supply-sider!) pushed through large tax cuts and spending increases during his first term, which helped the economy out of a nasty recession. President Clinton inherited a very weak economy, and proposed investment tax credits and other initiatives to sti