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A Teaching Topic in Fiscal, Monetary and Tax Policy

Open Economy, Exchange Rates and Trade

This topic examines the policy options available to governments to help reduce the volatility of business cycles. Employment insurance is a common example of a fiscal stabilization policy tool, used to reduce unemployment and stimulate consumer demand. This topic explores how short-term demand management policies can help stabilize the economy, and the problems that may arise from such policies(Carleton PADM 5223S).

Topic Learning Outcome:  Students will be able to analyze and interpret the fiscal policy actions of government, and will be able to articulate the arguments in favour of and against the most prevalent approaches to fiscal policy. Students will understand the relationship between government spending and aggregate demand, and will be able to clearly describe the fiscal policy tools that governments use in their efforts to mitigate the impact of recessions.

Core Concepts associated with this Topic: Aggregate Demand; Aggregate Supply Curve; Automatic Stabilizers; Business Cycle; Fiscal Policy; Involuntary Unemployment; Keynesian Economics; Labour Force; Labour Force Participation Rate; Multiplier Effect; Natural Rate of Unemployment; Stabilization Policy; Stabilization Policy Lags; Unemployment; Unemployment Rate.

Recommended Reading

Carleton: PADM 5223S Economic Policy in Canada

David A. Dodge, "Reflections on the Role of Fiscal Policy: The Doug Purvis Memorial Lecture," Canadian Public Policy, Volume 24, Number 3, 1998, pp 275 – 289.

Federal Budget 2010 http://www.budget.gc.ca/2010/pdf/budget-planbudgetaire-eng.pdf

Economic and Fiscal Statement 27 November 2008. http://www.fin.gc.ca/ec2008/Speech/speech-eng.html

Parliamentary Budget Officer, Assessment of Budget 2010. http://www2.parl.gc.ca/sites/pbodpb/documents/Budget_2010_Outlook.pdf

Parliamentary Budget Officer, Fiscal Sustainability Report. http://www2.parl.gc.ca/sites/pbodpb/documents/FSR_2010.pdf

 Sample Assessment Questions:

1.) What are automatic stabilizers? Explain, with an example, the role of automatic stabilizers in the fiscal policy of advanced economies.

2.) What is meant by the term "Keynesian fiscal policy," and why is this concept important?

3.)  What is the business cycle, and what is the role of fiscal policy in influencing the business cycle?

Page created by Sean Goertzen and Ben Eisen on 18 April 2015.

 


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School of Public Policy and Governance