Demand Management Policy Queens Economics …：需求管理政策女王的经济学….ppt

Demand Management Policy: The Fiscal Approach Chapter 11 Introduction The multiplier model highlights the role of aggregate demand management policies. These include monetary policy and fiscal policy. Introduction Fiscal policy – the deliberate change in either government spending or taxes to stimulate or slow down the economy. Introduction Expansionary fiscal policy involves decreasing taxes or increasing government spending. The Story of Fiscal Policy An economy needs a countershock to get out of a deep recession. Countershock – a jolt in the opposite direction of the shift in aggregate demand to get the multiplier working in reverse. The Story of Fiscal Policy Individuals, as individuals, are often not prepared to increase their spending during a recession. The Story of Fiscal Policy With fiscal policy, government could provide the needed increased spending by decreasing taxes, increasing government spending, or both. Aggregate Demand Management Aggregate demand management is governments attempt to control the aggregate level of spending in the economy. Aggregate Demand Management Demand management is necessary because the effects are significantly different when one person does something rather than everyone doing the same thing. Aggregate Demand Management Keynesians argued that, in times of recession, spending is a public good that benefits everyone. Fighting Recession: Expansionary Fiscal Policy The economy is below potential income during a recession. There is a recessionary gap. Recessionary gap – the difference between equilibrium income and potential income when potential income exceeds equilibrium income. Fighting Recession: Expansionary Fiscal Policy Fighting recession requires expansionary fiscal policy. Assuming that government knows the value of the multiplier, the right amount of money could be injected into the economy. Fighting Recession : Expansionary Fiscal Policy When multiplied, the increase in aggregate demand closes the recessionary gap. Fig