G5 Inflation

In this section you’re goal is to identify the policies needed when inflation and recession are present. These reading will help you gain information about government taxation and spending. This reading will also prepare you for further study on the role of government in the macroeconomy.

• Read Chapter 9: Fiscal Policy from John Petroff’s “Macroeconomics” text book, which provides definitions and insights into the key terminology used by economists to the different levers and methods of effecting the macroeconomy that governments have in their toolkit.

• Read Chapter 12, Section 2: The Use of Fiscal Policy to Stabilize the Economy from Principles of Macroeconomics text book, to learn how \ government’s fiscal actions influence aggregate demand. This section first discusses automatic stabilizers and how they function. It then covers discretionary fiscal policy, which are changes in aggregate demand resulting from changes in government purchases, income taxes, and transfer payments. Attempt the “Try It” exercises at the end of the section.

Deeper Reading

• Read MIT: Veronica Guerrieri’s “Principles of Macroeconomics, L18-L19: Fiscal Policy”lecture notes. While they are longer, they are actually a higher level review of the important details regarding fiscal policy, its complexities, and its potential.

Once you’re finished with your reading, share your thoughts with your classmates by writing a blog post. Remember to tag (WordPress) or label (Blogger) your blog post using the course tag: maec102 Do these different types of government interventions make sense? Can you think of examples of your local government using these interventions? Sharing with classmates can be a valuable way to clear up your own thoughts and get help from other learners.