Keynesian Fiscal Policy

INTRODUCTION

Last class we learned about booms and their effects on the macroeconomy (inflationary gaps in AS-AD) and busts (recessionary gaps). Today we will analyze economic fluctuations like these from the Keynesian perspective. We will conclude by discussing the Keynesian remedies for inflation and unemployment in regard to fiscal policy. You should have read the text chapter identified below in the homework section and watched the related videos. We will start class today with you working cooperatively with a partner to find a solution to the "Problem of the Day" and then there will be a lecture on our next topic. This page contains all the information you need for today's class: homework, the problem of the day, helpful resources (videos, podcasts, etc.) and an explanation of the activities we will do in class. Use the table of contents on the right to help you navigate.

HOMEWORK

Read Mankiw (Chapter 34 - How Fiscal Policy Influences Aggregate Demand section). Watch the following video too.

ASSESSMENTS AND ACTIVITIES

Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.

1. Define each of the following terms: inflation and recession.

2. Use an AS-AD diagram to illustrate a recessionary gap.

3. Use an AS-AD diagram to illustrate an inflationary gap.

Lecture

• Keynesian Fiscal Policy, the Accelerator Effect, and the Multiplier Effect

ENRICHMENT

• Ted Talks

  • Adam Davidson: What we learned from teetering on the fiscal cliff

• Videos

  • The Fiscal Cliff (2012)

• Podcasts

  • Garrett Jones on Irving Fisher, Debt, and Deflation

• Related Readings

  • The State of Economics (The Other Worldly Philosophers)

  • Lessons on Fiscal Policy Since the Recession

  • Economists, Obama administration at odds over role of mortgage debt in slow recoveryCauses of the 2008 Financial Crisis: 21 Book Review

  • 2008 crisis and the lessons of Lehman

  • Causes of the 2008 Financial Crisis: Review of 16 Academic Papers

  • Spain: Austerity vs. Crisis of Confidence

  • Liquidity Traps

  • Chairman Bernanke Should Listen to Professor Bernanke

  • Fiscal Policy

  • Fiscal Sustainability

  • Taxation

  • Unintended Consequences

  • Bonds

  • Capital Gains Taxes

  • Marginal Tax Rates

  • The Great Depression

  • Bank Runs

  • Too Big to Fail

  • Bankruptcy

  • Japan's Lost Decade

  • Pensions

  • Redistribution

  • Welfare

  • Keynes was Right, IMF Admits

  • Could the ‘platinum coin option’ solve the U.S. debt crisis?

  • Keynes-Hayek Raps: These are fun.

    • Fear of the Boom and Bust

    • Fight of the Century (Round 2)

  • Some European humor on debt crises here