The Government Sector
Fiscal Policy and Short-Run Stabilization
By the end of this chapter, you will be able to.
- Describe the economic functions of government in a market economy.
- Define the federal deficit (surplus) and explain its relationship to the federal debt.
- Identify the tools of fiscal policy.
- Describe how the inclusion of the government sector affects the ADAS model.
- Explain how autonomous changes in government spending and net taxes affect output, unemployment, and inflation.
- Assess the effectiveness of fiscal policy actions and describe problems in the implementation of fiscal policy.
- Explain how the incorporation of tax rates will influence the expenditure multiplier.
- Explain the effects of automatic stabilizers on ...