ECON 102 1st Edition Lecture 27 Outline of Last Lecture I Short run Aggregate Cont II Shocks a Demand Side Shocks b Supply Side Shocks c Negative Side Shocks Outline of Current Lecture I Role of Fiscal Policy in Economic Management a Government Policy Expansionary Contractionary Influence II Long Run Implications of Fiscal Policy Current Lecture Role of Fiscal Policy in Economic Management o Government Policy on G Government T Taxes TR Transfers o Expansionary Influence Direct influence through G Indirect influence through DI o Contractionary Influence Direct influence through G Indirect influence through DI Long Run implications of fiscal policy o To understand how budgets balances are measured we need to know how to Time period What is accounted for o US Government budget accounting is calculated on the basis of fiscal years o A fiscal year runs from October 1 September 30 o Persistent budget deficits have long run consequences because they lead to an increase in public debt o Public debt may crowd out investment spending which reduces long run economic growth These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute In extreme cases rising debt may lead to government default resulting in economic and financial turmoil o Can t a government that has trouble borrowing just print money to pay its bills Yes it can but this leads to another problem inflation A widely used measure of fiscal health is the debt GDP ratio o This number can remain stable or fall even in the face of moderate budget deficits if GDP rises over time Implicit liabilities Spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics
View Full Document
Unlocking...