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Objectives for Chapter 19: Fiscal Policy and Supply
Objectives for Chapter 19: Fiscal Policy and Supply

... The most compelling argument of the supply side economists is the hardest to estimate. If marginal tax rates are high, people do not just pay them. Instead, people look for ways to avoid taxes, called tax loopholes. (Tax avoidance should not be confused with tax evasion. Tax avoidance is legal. Tax ...
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... the longer-term benefits to infrastructure investment are less understood, the answer is often yes. A $1.3 investment in infrastructures can add $2.0 billion in growth and create more jobs in the economy. We also found that after an initial increase in aggregate demand, an economy's productive capac ...
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... Eurogroup finance ministers, said, “The 16 finance ministers agreed that recent American appeals insisting Europeans make an added budget effort were not to our liking.” 6 At its March meeting, after following the advice of the finance ministers and rejecting any additional stimulus, the European Co ...
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... • 1/s is called the multiplier because it shows how each additional dollar of autonomous spending results in a greater than $1 increase in equilibrium output. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. ...
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... • 1/s is called the multiplier because it shows how each additional dollar of autonomous spending results in a greater than $1 increase in equilibrium output. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. ...
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chapter 3 – interdependence between major sectors

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... A. Scarcity and choice 1. Resources can only be used for one purpose at a time. 2. Scarcity requires that choices be made. 3. The cost of any good, service, or activity is the value of what must be given up to obtain it. (opportunity cost). B. Rational Behavior 1. Rational self-interest entails maki ...
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... debt and deficits upon interest rates. Barth et al. (1991) surveys 42 earlier papers through 1989, of which 17 claimed positive effects, 19 showed negative effects, and 6 found mixed effects. Gale and Orszag (2003) review recent studies and conclude that current deficits tend to have a significant impact ...
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... base year. Regarding the choice of the base year, the average values over the analysis period is conventionally retained for lack of an objective reference or equilibrium values (Ary et al. [2012]). In determining the weights, two methods are adopted in the literature. On the one hand, the weights o ...
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Fiscal multiplier

In economics, the fiscal multiplier (not to be confused with monetary multiplier) is the ratio of a change in national income to the change in government spending that causes it. More generally, the exogenous spending multiplier is the ratio of a change in national income to any autonomous change in spending (private investment spending, consumer spending, government spending, or spending by foreigners on the country's exports) that causes it. When this multiplier exceeds one, the enhanced effect on national income is called the multiplier effect. The mechanism that can give rise to a multiplier effect is that an initial incremental amount of spending can lead to increased consumption spending, increasing income further and hence further increasing consumption, etc., resulting in an overall increase in national income greater than the initial incremental amount of spending. In other words, an initial change in aggregate demand may cause a change in aggregate output (and hence the aggregate income that it generates) that is a multiple of the initial change.The existence of a multiplier effect was initially proposed by Keynes student Richard Kahn in 1930 and published in 1931. Some other schools of economic thought reject or downplay the importance of multiplier effects, particularly in terms of the long run. The multiplier effect has been used as an argument for the efficacy of government spending or taxation relief to stimulate aggregate demand.In certain cases multiplier values less than one have been empirically measured (an example is sports stadiums), suggesting that certain types of government spending crowd out private investment or consumer spending that would have otherwise taken place. This crowding out can occur because the initial increase in spending may cause an increase in interest rates or in the price level. In 2009, The Economist magazine noted ""economists are in fact deeply divided about how well, or indeed whether, such stimulus works"", partly because of a lack of empirical data from non-military based stimulus. New evidence came from the American Recovery and Reinvestment Act of 2009, whose benefits were projected based on fiscal multipliers and which was in fact followed - from 2010 to 2012 - by a slowing of job loss and private sector job growth.
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