Aggregate Demand and Aggregate Supply/Fiscal Policy, Deficit and Debt
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Chapter 32
3 things that confused me:
• In economic recessions, increasing money supply may fail to increase aggregate demand and may also fail to improve the economic situation of a country.
• An increase in price levels results in an increase in money demand.
• Changes in government spending impact aggregate demand (McConnell et al. 640-641).
One thing surprised me:
• Foreign and domestic spending are factors that cause shifts in aggregate demand (McConnell et al. 641).
One thing I learned:
• An increase in aggregate demand can result in a type of inflation called demand-pull inflation which increases the GDP (McConnell et al. 648).
Chapter 33
3 things that confused me:
• It is possible for the president to initiate and implement fiscal policies without congressional support.
• GDP changes automatically result in changes in tax revenues hence cyclically adjusted budgets are used to adjust budget surpluses and deficits based on these changes.
• During the formulation of fiscal policies, political considerations may override economic considerations especially during the election periods (McConnell et al. 670-672).
One thing surprised me:
• The U.S has the largest public debt in the world and this debt exceeds the Federal Reserve (McConnell et al. 672).
One thing I learned:
• The government uses fiscal policies to increase aggregate demand during recessions and to reduce demand-pull inflations during economic booms. Changes in tax levels and government spending are the main strategies used to create these changes (McConnell et al. 661).
Works Cited
McConnell, Campbell R. et al. Economics:. 21st ed., Mcgraw-Hill Education, 2021.