Implementing Fiscal Policy

Implementing Fiscal Policy

1. 1) Recognition

   • Economic problem (recession, etc) must be recognized
   • 2) Legislative
     • 3) Implementation
       • 4) Effectiveness
         • 5) Evaluation
           • Did it work?
         • Time needed
       • Bureaucracies must implement
     • Congress proposes & Passes a plan
       • As you know, this takes FOREVER

2. CONGRESS ONLY! The Fed is not involved in fiscal policy

3. AUTOMATIC STABILIZERS!

   • Welfare & Transfer programs
     • More people apply
       • More $
         • More spending
           • Increase AD curve
   • Consumption Smoothing
     • People dissave
       • Credit Cards help with consumption smoothing
       • Increase AD