Economics Principles and Practices © 2012 Georgia

Chapter 15: Economic Stabilization Policies

Chapter Overviews

Section 1: Macroeconomic Equilibrium

Macroeconomic equilibrium is reached when the level of real GDP is consistent with a given price level, and it is determined by the intersection of the aggregate supply and demand curves. The aggregate supply curve represents the sum of all production at all possible price levels. The aggregate demand curve represents the total demand that would take place at all possible price levels. Most of the factors that influence the individual supply and demand curves also affect the aggregate curves—they shift to the right to represent an increase, and to the left to represent a decrease.

Section 2: Stabilization Policies

Several stabilization policies have been established. Demand-side policies evolved from Keynesian economics and are designed to affect the aggregate demand curve. Supply-side economics are those economic policies designed to affect the aggregate supply curve. Monetary policies include actions by the Federal Reserve System (Fed) that change the cost and the availability of credit.

Section 3: Economics and Politics

The government can influence the economy with discretionary, passive, or structural fiscal policies. Economists come from a variety of backgrounds and have a diversity of interests. Even so, they are more in agreement on key issues than most people realize. In addition, they have made considerable headway in raising awareness of how the economy operates. Finally, the president's Council of Economic Advisers provides advice on economic matters and advocates the president's economic programs.

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