Firstly I would like to examine the macroeconomic goals/aims of Gordon Brown and his fiscal policy. Fiscal policy is the governments plan for spending and taxation, it is designed to steer aggregate demand in some desired direction, which we will investigate in greater detail later on today. Macroeconomic policy is a phrase used to describe actions taken by governments to manipulate the economy to influence the level of inflation and unemployment. Along with balance of payments and high stable economic growth, low inflation and high employment are two of the main four macroeconomic goals of the government. In practice, macroeconomic policies could be us

data. The relevance of rational expectations is displayed in the Ricardian Equivalence in that a tax cut will not increase my disposable income because I will anticipate an increase in taxes in the long run to offset the initial cut and the extra income from the reduction of taxes will go entirely into savings to pay taxes at a later date.

ed to refer either to policies sought to influence aggregate supply or to policies that sought to influence aggregate demand. We will investigate aggregate supply and aggregate demand both in the long run and in the short run and show their effects on macroeconomic policy.

Aggregate Demand and Aggregate Supply in the short run as as shown in figure 2.

An example of this is where the government cuts taxes by $500 million, however to cover this loss in revenue the government issues $500 million in government bonds. The bonds do come at a cost because bonds are valued at their present value plus the value of future interest payments to the holder of the bond. The bond will have to be paid back plus interest, and to find these funds when the bond is converted the government will simply raise taxes. Essentially a decrease in income tax to the private sector today is a nice bonus, but this bonus in the long run will be matched be an equal penalty of increased taxes to makeup for the initial cut. This tells us that the private sector is neither richer or poorer as a result of this tax cut, and hence will not change desired spending and has no effect on aggregate demand. The theory of rational expectations, which are forecasts, and although they may not necessarily be correct, are the best that can be made given the available!

Some common words found in the essay are:
Gordon Brown, Ricardian Equivalence, IS-LM Model, Macroeoconomic Environment, DL DL1, Chancellor Exchequer, AD AD1, Aggregate Supply, LM LM1, AD1 Aggregate, aggregate demand, aggregate supply, gordon brown, income taxes, decrease income, fiscal policy, decrease income taxes, is-lm model, figure 3, short run, increase aggregate, increase aggregate demand, aggregate demand aggregate, aggregate supply aggregate, supply aggregate demand,
Approximate Word count = 1588
Approximate Pages = 6 (250 words per page double spaced)