7.1 Fiscal Policy and Effects ⊙ Automatic stabilizer . In depression Y↓→>TR↑→C↑→AE↑→Y↑ .In flourish *Y↑→T↑→C↓→AE↓→Y个 友学经济学院
7.1 Fiscal Policy and Effects Automatic Stabilizer ❖ In depression ： Y → TR↑→ C ↑ → AE↑ → Y ↑ ❖ In flourish： Y ↑ → T ↑ → C → AE → Y ↑
7.1 Fiscal Policy and Effects o Developing Stages of Western Fiscal Policies 6o1936-1945: anti-depression, simple and inflationary fiscal policy 6o1945-1961: anti-business-cycle and compensative fiscal policy o1961-1979: fiscal policies with full employment budget .o1981- 1991: fiscal policies of supply-side school 友学经济学院
7.1 Fiscal Policy and Effects Developing Stages of Western Fiscal Policies ❖ 1936 ~ 1945: anti-depression, simple and inflationary fiscal policy ❖ 1945 ~ 1961:anti-business-cycle and compensative fiscal policy ❖ 1961 ~ 1979: fiscal policies with full employment budget ❖ 1981 ~ 1991:fiscal policies of supply-side school
7.1 Fiscal Policy and Effects ⊙ Annual Balance budget o Cyclical Balance Budget o Full-employment Balance Budget 友学经济学院
7.1 Fiscal Policy and Effects Annual Balance Budget Cyclical Balance Budget Full-employment Balance Budget
Fiscal policy: IS curve shifts R RI R1 B B R2 R2 IS1 IS IS2 IS2 Y2 Y1 Y Y2 YI Total taxt, Is shifts to the left Tax ratet, Is becomes more steep 友学经济学院
R LM IS1 Y1 Y R1 A IS2 B R2 Y2 R LM IS1 Y1 Y R1 A IS2 B R2 Y2 Total tax↑, IS shifts to the left Tax rate↑, IS becomes more steep Fiscal policy：IS curve shifts
7.1 Fiscal Policy and Effects o Crowding-out Effect Pro-economic fiscal policy will lead to a increase in interest rate and personal investment is crowded out *G↑→AE↑→AE>Y>Y↑ Y↑→>Md↑→>Ma>Ms→>R↑ R↑→ 友学经济学院
Crowding-out Effect ❖ Pro-economic fiscal policy will lead to a increase in interest rate and personal investment is crowded out. G↑ → AE ↑→ AE > Y → Y ↑ Y↑ → Md ↑ → Md > Ms → R ↑ R ↑ → I 7.1 Fiscal Policy and Effects