Chapter 1

A Brief History of Fiscal Theory

It is seldom possible to pinpoint the birth of an idiom, or know exactly when a term was coined. However, in the case of macroeconomics we are able to do that. The term “macroeconomics” was coined by Klein in 1946, in an article titled “Macroeconomics and the Theory of Rational Behavior.”


Macroeconomics is the study of aggregated indicators, such as gross domestic product (GDP).


GDP is the value of final goods and services produced in a country in one year.

The conduct of governments in modern economies affects aggregate economic indicators. The influence of government on the economy is often deliberate, for example, when taxes are increased to reduce budget deficits. Sometimes ...

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