fiscal policy

• Variables the government wants to influence with fiscal policy


  • RGDP
  • Employment
  • Price stability (inflation)
• What is a Ricardian Equivalence Theory?

  People see that a tax cut today will just mean higher taxes in the future, they are hesitant to spend so freely after the tax cut
• Treasury Bills(T-Bills)


  Shortest of Treasury Securities by U.S. Government, mature in less than a year
• Treasury Notes

  Longer-term investments between 1 - 10 years. Return on 10-year notes are considered indicator of a country's overall macroeconomic health.
• Treasury Bonds


  Mature in 30 years and pay a specific amount of interest every 6 months
• What is the formulation lag?


  The process of deciding on and passing legislation
• What is the information lag?

  Understanding what the current economic situation is
• What is the implementation lag?

  The time it takes for the policy to affect the economy
• How is government spending considered an automatic stabilizer?

  Government uses social services, and spends more or less depending on the economy and fiscal policy
• How are taxes automatic stablizers?

  Taxes rates increase as people get more income