In chapter 10 you will learn: What fiscal policy is and what it is used for; what discretionary fiscal policy is and its function; about the economy’s built-in stabilizers; what a cyclically adjusted budget is; the problems, criticisms, and complications of fiscal policy. | CHAPTER 10 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE FISCAL POLICY In this chapter you will learn What fiscal policy is and what it is used for What discretionary fiscal policy is and its function About the economy’s built-in stabilizers What a cyclically adjusted budget is The problems, criticisms, and complications of fiscal policy Chapter 10 Topics Legislative Mandates Fiscal Policy & the AD-AS Model Built-In Stabilization Evaluating Fiscal Policy Problems, Criticisms & Complications Legislative Mandates Great Depression need for stabilization role Unemployment Insurance introduced during World War II Governments regularly use fiscal policy to stabilize the economy Chapter 10 Topics Legislative Mandates Fiscal Policy & the AD-AS Model Built-In Stabilization Evaluating Fiscal Policy Problems, Criticisms & Complications Definition: Deliberate changes of government expenditures taxes Dependent upon deliberate decisions in Parliament Discretionary Fiscal Policy Expansionary . | CHAPTER 10 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE FISCAL POLICY In this chapter you will learn What fiscal policy is and what it is used for What discretionary fiscal policy is and its function About the economy’s built-in stabilizers What a cyclically adjusted budget is The problems, criticisms, and complications of fiscal policy Chapter 10 Topics Legislative Mandates Fiscal Policy & the AD-AS Model Built-In Stabilization Evaluating Fiscal Policy Problems, Criticisms & Complications Legislative Mandates Great Depression need for stabilization role Unemployment Insurance introduced during World War II Governments regularly use fiscal policy to stabilize the economy Chapter 10 Topics Legislative Mandates Fiscal Policy & the AD-AS Model Built-In Stabilization Evaluating Fiscal Policy Problems, Criticisms & Complications Definition: Deliberate changes of government expenditures taxes Dependent upon deliberate decisions in Parliament Discretionary Fiscal Policy Expansionary Fiscal Policy Recessionary Gap Options: Increase Government Spending Decrease Taxes Some Combination of the Two Discretionary Fiscal Policy AS AD0 Price level Real GDP (billions) PL0 GDPf GDP0 recessionary gap Expansionary Fiscal Policy Figure 10-1 AS AD0 Price level Real GDP (billions) PL0 GDPf GDP0 PL1 AD1 Figure 10-1 Expansionary Fiscal Policy Contractionary Fiscal Policy Inflationary Gap Options: Decrease Government Spending Increase Taxes Some Combination of the Two Discretionary Fiscal Policy Real GDP (billions) AS GDPf AD3 PL3 Price level GDP3 inflationary gap Figure 10-2 Contractionary Fiscal Policy Real GDP (billions) AS GDPf AD3 PL2 AD2 Price level Figure 10-2 Contractionary Fiscal Policy PL3 Policy Options: G or T? depends on political views about size of government Chapter 10 Topics Legislative Mandates Fiscal Policy & the AD-AS Model Built-In Stabilization Evaluating Fiscal Policy Problems, Criticisms & Complications A tax or government expenditure which automatically: .
