宏观经济学chapter 21..ppt

Chapter21Fiscalpolicyandforeigntrade 1 Somekeyterms Fiscalpolicythegovernment sdecisionsaboutspendingandtaxesStabilisationpolicypolicymaker sactionstotrytokeepoutputclosetoitspotentiallevelBudgetdeficittheexcessofgovernmentoutlaysovergovernmentreceiptsNationaldebtthestockofoutstandinggovernmentdebt 2 UKPublicFinances2001 2 bn RevenueExpendituredirecttaxgoodsandservicesincometax104NHS59corporationtax38education50socialsecurity63defence24indirecttaxlaw order23VAT61het10exciseduty37transferpaymentspropertytax32socialsec109Other64debtint23other61Total398Total394 3 Governmentintheincome expendituremodel aggregatedemandisnowAD C I GdisposableincomeisYD Y NT Y tY 1 t YwhereYDisdisposableincome Yisincomeandtisthenettaxrate 4 Governmentintheincome expendituremodel DirecttaxesaffecttheslopeoftheconsumptionfunctionandhencetheslopeoftheADschedule GovernmentexpenditureaffectsthepositionoftheADschedule 5 ConsumptionandTaxes TheconsumptionfunctionbecomesC A cYDorC A c 1 t YsotaxesaffecttheslopeoftheconsumptionfunctionTheMPCbecomesc 1 t 6 ConsumptionandTaxes Income Consumption C A cY 0 C A c 1 t Y 7 ConsumptionandTaxes anexample Income Consumption C 100 0 9Y 0 C 100 0 72Y A 100 c 0 9 t 0 2 c 1 t 0 9x0 8 0 72 8 Aggregatedemandandtaxes Income Aggregatedemand AD notaxes Withouttaxes C A cY soAD C I A I 1 c Withtaxes C A c 1 t Y soAD C I A I 1 c 1 t AD withtaxes 9 GovernmentSpending Income Aggregatedemand ADwithGovtExp tax GovernmentSpendingshiftsADlineupwards WithGovtExpAD C I GAD A I G 1 c 1 t ADwithtax AD NoTax 10 TheMultiplierRevisited Notethatthesizeofthemultiplierisreduced Taxesareanadditionalleakagefromthecircularflow Thehigherthetaxrate thegreatertheleakageofspendingateachstepofthemultiplierprocess thereforethelowerthevalueofthemultiplier Example MPC 0 8Ift 0 2 MPCt 0 8 1 t 0 8x0 8 0 64 soK 1 1 0 64 2 77Ift 0 4 MPCt 0 8 1 t 0 8x0 6 0 48 soK 1 1 0 48 1 92 11 Fiscalpolicy Income output Aggregatedemand 45oline AD0 Y0 Butthisignoressomeimportantissues prices interestrates andtheneedtofundthegovernmentspending 12 Thegovernmentbudget Thebudgetdeficitequalstotalgovernmentspendingminustotaltaxrevenue G NT Income output 13 Deficitsandthefiscalstance Thesizeofthebudgetdeficitisnotagoodmeasureofthegovernment sfiscalstance Thestructuralbudgetshowswhatthebudgetwouldhavebeenifoutputhadbeenatthefull employmentlevel Theinflation adjustedbudgetusesrealnotnominalinterestratestocalculategovernmentspendingondebtinterest 14 Automaticstabilisers mechanismsintheeconomythatreducetheresponseofGNPtoshocksforexample inarecession paymentsofunemploymentbenefitsrisereceiptsfromVATandincometaxfall DiscretionaryStabilizationPolicy 15 Limitsonactivefiscalpolicy Timelags ittakestimetodiagnosetheproblem Datahaslags Decisionstaketimetotakeaction BudgetprocesstochangetaxesetcforthemultiplierprocesstooperateUncertaintythesizeofthemultiplierisnotknown itchangesaggregatedemandisalwayschanging weneedtoforecastInducedeffectsonautonomousdemandchangesinfiscalpolicymayinduceoffsettingeffectsinothercomponentsofaggregatedemand Whycan tshockstoaggregatedemandimmediatelybeoffsetbyfiscalpolicy 16 TheNationalDebt UKNationalDebt GDP 197319791985199220016048462832Howcannationaldebtsbereduced Byrunningaprimarysurplus taxesexceedexpenditurenetofdebtinterestpaymentsthisiseasierwhengrowthisstrongandrealinterestratesarelow 17 shouldweworryabouttheNationalDebt Ifpublicsectorborrowingisusedininvestmentthatwillraisefutureincomesandtaxes thendebtislessseriousButlargedebtsrequirelargeinterestpaymentswhichmayrequirehightaxesanddivertresourcesfromproductiveusesVerylargedebtscannotbeservicedfromtaxesandsorequirehigherborrowingThereisalimittotheamountthatcanbeborrowed sodebtcrisesarepossible 18 internationalcomparisonsofdebtlevels GDP 198120022005Belgium849294Italy5392106Netherlands253659US223650UK382828Germany124067Japan1964125Sweden6151France06369 19 Foreigntradeandincomedetermination Introducingexports X imports Z TRADEBALANCEthevalueofnetexports X Z TRADEDEFICITwhenimportsexceedexportsTRADESURPLUSwhenexportsexceedimportsEquilibriumisnowwhereY C I G X Z 20 ForeignTradeintheincome expendituremodel aggregatedemandisnowAD C I G X ZassumeimportsareZ Az czYthenczisthemarginalpropensitytoimport 21 Exports importsandthetradebalance Income X Z 22 Exports importsandthetradebalance Income 50 X Z 23 Foreigntradeandthemultiplier Themarginalpropensitytoimport MPZ isthefractionofadditionalincomethatdomesticresidentswishtospendonadditionalimports Theeffectofforeigntradeistoreducethesizeofthemultiplierthehigherthevalueofthemarginalpropensitytoimpor