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PG 230 Fiscal Policy. What is Fiscal Policy? (expansionary and contractionary) Why is it important? What are the tools of Fiscal Policy What are Automatic.

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Presentation on theme: "PG 230 Fiscal Policy. What is Fiscal Policy? (expansionary and contractionary) Why is it important? What are the tools of Fiscal Policy What are Automatic."— Presentation transcript:

1 PG 230 Fiscal Policy

2 What is Fiscal Policy? (expansionary and contractionary) Why is it important? What are the tools of Fiscal Policy What are Automatic Stabilizers? E.g.? What are the drawbacks and limitations of Fiscal Policy?

3 E.G. Fiscal Policy in the Housing Market The United States Market -banks loosened lending laws which allowed more people to have lower mortgage rates and have no down payment when purchasing a home. -People bought more house than they could afford - Economy started to crash, people lost their jobs and couldn’t afford their mortgages. -Massive amounts of houses foreclosed and housing prices crashed. The Canadian Government’s Response -Canadians MUST have a 20% down payment before purchasing a home or they pay mortgage insurance. -More conservative banking practices. More intensive credit checks on customers. -Shorten the amortization period. Shorten the amount of time you can have a mortgage for which means higher payments

4 http://www.theglobeandmail.com/report-on- business/economy/manufacturing/is-canada- grappling-with-dutch-disease/article4184569/ http://www.theglobeandmail.com/report-on- business/economy/manufacturing/is-canada- grappling-with-dutch-disease/article4184569/ Actionplan.gc.ca http://www.actionplan.gc.ca/en/blog/new-building- canada-plan

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