Topic Nine

Fiscal Policy & Keynesian Economics

Required Readings:

  • Waymaker Module: Fiscal Policy

Video Lecture Clips:

Additional Readings:  (Check these for fiscal policy / Keynesian references)

  • Heilbroner, Chapter 6? “The Great Depression”, Chapter 7? “The Rise of the Public Sector”, and Chapter 9? “The Golden Age of Capitalism” (I numbered the  chapters with ?-marks since the numbers may depend on which edition you have.)
  • Blinder, Chapters 2 – 3
  • Friedman and Friedman, Chapters 3, 4, 9 and 10
  • Schultze, Memoranda 12, 15-19, and 29

Learning Objectives:

  • You should be able to define a recessionary gap, and an inflationary gap.
  • You should be able to explain graphically how the tools of fiscal policy work.
  • You should be able to explain the difference between fiscal & monetary policy.
  • You should be able to explain the difference between discretionary fiscal policy and automatic stabilizers.
  • You should be able to explain the fundamental characteristics of Keynesian Economics, and differentiate them from other schools of thought.
  • You should be able to explain and show graphically how fiscal policy from a Keynesian perspective can be used to correct recessionary and inflationary gaps.
  • You should be able to explain the concept of the expenditure multiplier.

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