讲座政策公共债务学习目标.pptx

Lecture6

Fiscalpolicyandthepublicdebt

7-1

LearningObjectivesOutlineequilibriumintheeconomybetweenaggregatesupplyanddemandforgoodsandservices.Explainhowadegreeofeconomicstabilityisbuiltintoourtaxsystem.Surveysomebasicproblemsintheapplicationoffiscalpolicy.

7-2

LearningObjectives(cont.)Brieflydiscussseveralcontrastingbudgetphilosophies.Assessthequantitativeandqualitativeaspectsofthepublicdebt.Discusstheimplicationsof,andcomplicationsassociatedwith,fiscalpolicywithintheaggregatedemand–aggregatesupplyframework.

7-3

Macro-EconomicequilibriumTheeconomywillbeinamacroequilibriumwhenaggregatedemandforgoodsandservicesequalsaggregatesupplyforgoodsandservices.AD–aggregatedemandforgoodsandservicesismadeupofC+I+G+(X-M).TheADcurveisdownwardslopingbecauseof:1.interestrateeffect;2.real-balanceseffectand3.foreignpurchaseseffect.

7-4

AggregatesupplycurveTheshort-runaggregatesupplycurveisupwardslopingasinputpricesareassumedtobefixed–thereforeanincreaseinpricesforfinalproductswillincreaseprofitabilityandhenceencouragefirmstosupplymore.Thelong-runaggregatesupplycurveisverticalatthelevelofpotentialoutputconsistentwiththeeconomy’snaturalrateofunemployment.Noguaranteethattherewillbesufficientdemandtoensurefullemployment.Ortoomuchdemandandthereforeinflation.RevisionofADandAS:

7-5

EquilibriumandfullemploymentQprepresentsfullemploymentequilibriumfortheeconomy–seediagramonnextslide.TheeconomyiscurrentlyatQebelowfullemploymentequilibrium–calledadeflationarygap.TheaimoffiscalpolicyistoincreaseADiftheeconomyisbelowfull-employmentequilibrium–orreduceitifitisabovefullemploymentequilibrium.

7-6

EquilibriumrealGDPandequilibrium

pricelevel7-7ASLSQpASPricelevelRealdomesticoutputADQePeQ1P3Q2P2

DiscretionaryFiscalPolicyThede