Principles of Macroeconomics / Unit 14 MAC 1315 short lesson, about 20 seconds
Spending or Taxes: The Model Does Not Choose
Captions available
The idea
The model says a recessionary gap calls for expansion. It does not say whether to expand by spending more or taxing less, because both shift aggregate demand right. That choice turns on what people think government should do.
In practice
Both sides of that argument use the same diagram, correctly.
Where people slip
This is a political question wearing an economic costume, and the course says so.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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