"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Sunday, January 18, 2015

Expenditure changing versus expenditure switching

Expenditure Changing and Expenditure Switching policies

In an open economy setting, policymakers need to achieve two goals of macroeconomic stability, viz. internal and external balances. Internal balance is a state in which the economy is at its potential level of output, i.e., it maintains the full employment of a country’s resources and domestic price levels are stable.

External balance is attained when a country is running neither excessive current account deficit nor surplus (i.e., net exports are equal or close to zero). Attaining  internal and external balances requires two independent policy tools (also see Swan diagram). One is expenditure changing policy and the other is expenditure switching policy.

Expenditure changing policy aims to affect income and employment with the goal of equating domestic expenditure or absorption and production and takes  the form of fiscal or monetary policy. Expenditure switching is a macroeconomic policy that affects the composition of a country’s expenditure on foreign and domestic goods. More specifically it is a policy to balance a country’s current account by altering the composition of expenditures on foreign and domestic goods (see Balance of payments account). Not only does it affect current account balances, but it can influence total demand, and thereby the equilibrium output level.

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