Questions tagged [fiscal-policy]

the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

21 questions with no upvoted or accepted answers
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Supply-side economics: reduction in tax

In a nutshell Supply-side economists support reductions in tax, because government revenue can increase (according to the Laffer curve) and businesses and consumers will be incentivised to invest (...
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What major fiscal policy actions were taken during the Great Recession (2007-09)?

What major fiscal policy actions were taken during the Great Recession (2007-2009)?
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Impact of Fiscal and Monetary Policy during Great Recession on U.S. Economic Performance

What major fiscal and monetary policy actions were taken during the Great Recession (2007-2009)? What impact did they have on U.S. economic performance? I understand how how the recession occurred in ...
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Does higher tax on luxury goods does more harm than benefit?

I was studying Fiscal policy and I came across measures to reduce income inequality by using fiscal tools. One of the tool mentioned in that was - Higher taxes on luxury goods This makes sense that ...
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Do changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption

True or False: Changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption
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63 views

Could the inflation following the Gold Rush have been avoided, are we any “wiser” on inflation now?

Quoting Milton Friedman on the inflationary period shortly following the American Gold Rush in California: "Because there was more gold, they had to pay a little more gold to buy goods and ...
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349 views

What is the effect of expansionary fiscal policy in case liquidity trap situation?

I've read that liquidity trap means interest rate is at its minimum and increase in real money stock will not lead to fall in interest rate because people will be demanding whatever the amount is ...
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137 views

How does Limited Friction affect a two-period model? Does the Ricardian Equivalence hold?

Consider a two period model with limited commitment involved. Each consumer has a component of wealth which has value $pH$ in the future period, cannot be sold in the current period, and can be ...
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Is there a term for economic policy design built from minimizing per-household adverse impact?

May be easiest to start with an example: let's say I'm looking to eliminate the mortgage interest deduction, but want to minimize the impact on households from doing so. I also want the change to be ...
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48 views

Negative interest rates - Fiscal Policy (Demand-side)

(This is part two of a series of questions I've posted here under "Negative interest rates") Motivation: I've happen to stumble on two articles, with some weeks, that the central bank(CB) of ...
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97 views

Have all the PIIGS tried stimulus?

Greece: signs of growth come as austerity eases Last month the Greek parliament approved a stimulus programme involving highway construction that is quite large. According to the ministry of ...
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Relationship between Fiscal policy and net exports

I am confused about the relationship between fiscal policy and net exports. Suppose government goes for expansionary fiscal policy Case 1  - If public expenditure rises, income rise, rise in ...
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Why is Crowding out more effective at full employment?

Now my professor explained to me that at full employment the increase in G (gov expenditure) shifts the IS curve to the right, but at the same time the price level increase from the rightward shift in ...
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which policy (fiscal or monetary) is better to stabilize the cycle?

I am currently studying for a test and the following sentence "In an open economy with high capital mobility, monetary policy is preferable to fiscal policy to stabilize the cycle", the "answer" is ...
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Diligent, wise bona fide voters

Can a diligent, wise and bona fide voter choose procyclical policies? I am asking if there is any explanation. In diligent and wise I mean people who appreciate the Ponzi scheme, want to balance ...
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What is the optimal fiscal transfer rate between regions in a currency union?

I'm aware of the theory of optimal currency areas, and that both the Euro and the US dollar* are technically not optimal. This would tend to cause their optimal monetary policy to diverge over time. ...
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22 views

Different explanation for economic growth, depending on the length of the period considered

I'm being introduced to macroeconomics, and a colleague asked why do we say that in the short term the productivity of a country is determined by the "demand side" (IS/LM model) while in the long run ...
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81 views

Active Passive Monetary and Fiscal Policy

I'm trying to understand a little better the operational differences between active and passive monetary-fiscal policy. For instance, is it that one should see different Taylor Rule feedback ...
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Fiscal sustainability: Debt dynamics

The change in debt ratio can be written as the equation Where G-T is the primary budget deficit. r is a constant interest rate. g is the growth rate. The equation for debt ratio can be drawn in a △d/...
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Why is the appropriation for basic education in South Africa's MTBPS so low?

I wanted to find out how much South Africa currently spends on basic education (primary and secondary schools). The information is on www.treasury.gov.za . The last budget reports that the government ...
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211 views

How does an elastic Money Demand affects the effectiveness of fiscal policy?

From my notes: 'The elasticity of Money Demand reduces the impact on the interest rate of the increase in government spending...' My question is: if the Money Supply is inelastic, the elasticity of ...