(BQ) Part 2 book "Macroeconomics - Private and public choice" hass contents: Money and the banking system, stabilization policy, output, and employment; stabilization policy, output, and employment; gaining from international trade; international finance and the foreign exchange market,.and other contents. | Find more at C H A P T E RE R C H A P T 12 8 Fiscal Policy: Incentives, Supply, Demand, and and Secondary Effects the Market Process C H A P T E R F O C U S ● How do the crowding-out and new classical models of fiscal policy modify the Keynesian analysis? ● Is discretionary fiscal policy an effective stabilization tool? Is there broad agreement among Keynesians and non-Keynesians on this issue? ● Will increases in government spending financed by borrowing help promote recovery from a recession? ● Is saving good or bad for the economy? ● Are there supply-side effects of fiscal policy? The main difference if it [the I am convinced that between Keynes and modern economics is market system] were the result thedeliberate incentives. Keynes of focus on human design, and studied the relation between if the people guided by the price macroeconomic aggregates, changes understood that their without any consideration for decisions have signif icance far the underlying incentivesaim, this beyond their immediate that lead to the formation ofbeen mechanism would have these aggregates. By contrast, greatest acclaimed as one of the modern economists base human mind. triumphs of the all their analysis on incentives. —Friedrich Hayek, Nobel Zingales 1 —Luigi Laureate 1 From the point of view of physics, it is a miracle that [seven million New Yorkers are fed each day] without any control mechanism other than sheer capitalism. —John H. Holland, scientist, Santa Fe Institute 1 Luigi Zingales, Booth School of Business at the University of Chicago, March 10, 2009. Online debate sponsored by The Economist. Find more at A s we discussed in the previous chapter, Keynesian analysis indicates that fiscal policy provides a potential tool through which aggregate demand can be controlled and maintained at a level consistent with full employment and price stability. During the 1970s, however, the economic instability, along with .
