this matters for the choice of using either fiscal or monetary policy to respond to the economic shock

supply shocks demand contractionary aggregate demand policy but expansionary monetary policy

partisan business cycles are generated by supply shocks and real business cycles are generated by demand shocks

in the face of a supply shock aggregate demand policy will not be particularly useful since it will either compound the impact on inflation or unemployment of a supply shock

real business cycle theor

impulse propagation mechanism

deterministic AS-AD system

political business cycles

uses and sources of seigniorage

automatic stabilizers

pro-cyclical fiscal policy instruments

debt stabilization

was expansionary as can be seen from the increase in the cyclically adjusted government budget deficit

was contractionary as can be seen from the increase in the government budget surplus

increases the actual budget deficit by an amount equal to the distance AB

matters only for the composition of GDP between private and public uses and not for the level of GDP

(A) existing debt; (B) interest payment

(A) seigniorage; (B) existing debt

(A) government bonds held by foreigners; (B) interest payment

(A) seigniorage; (B) interest payment