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Macroeconomics, 9/e

Campbell R. McConnell, University of Nebraska, Lincoln
Stanley L. Brue, Pacific Lutheran University
Thomas P. Barbiero, Ryerson University

Fiscal Policy

Internet Application Questions


1		Go to: http://www.canoe.ca/CNEWSPolitics9905/25_cleroux.html and read the first article "Tax Cuts Don't Help Much." Then answer the following questions: Why does Richard Cleroux argue that direct government spending is a better way to create jobs than using tax cuts? Explain your answer, with direct evidence from the article. Why, according to Cleroux, do businesses prefer tax cuts to increased government spending? What is the most effective way for the government to maximize job creation, according to Cleroux? What are two reasons for this? Explain how aggregate demand, equilibrium price level, and real GDP would be affected by (a) A tax cut and (b) Increased government spending.



2		Go to: http://www.jameslaxer.com/harris.htm and answer the following questions based on chapter 10 (Fiscal Policy): The Ontario Government, led by Mike Harris, has repeatedly said that it felt government was too large and inefficient. According to the textbook, under what conditions would it be more likely to use taxation or government spending changes as a policy option? The Harris Government has claimed that its tax cuts have been the main driver of Ontario's economic growth in recent years. What is James Laxer's opinion of this? Explain. The article states, "Mike Harris is a firm believer in the supply-side doctrine of Ronald Reagan..." In theory, according to the text, how could a tax cut affect aggregate supply (AS)? Give three ways. What are some criticisms of supply-side effects of a tax cut?

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