contractionary policies are policies designed to This is a topic that many people are looking for. newyorkcityvoices.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, newyorkcityvoices.org would like to introduce to you Introduction to Fiscal Policy – Expansionary vs. Contractionary Policies. Following along are instructions in the video below:
” s a real estate geek. Andrew finney. Here so today we re back with real real estate trends. And what we re gonna be taking a look at today is is an emd there s three key takeaways that you re going to learn in this video.
Today. Number. One actually. What is namd number two how much is it usually and number three is the difference between an emd and a downpayment so and these like anything else in life is an acronym.
I mean we got so many olam out there think of like the nfl. The nba. The pga lpga you got a vin a pin atm and the list just goes on and on and on so. What is an earnest money.
Deposit. Essentially an earnest money deposit can be best defined as a deposit of good faith from a buyer to a seller. When purchasing their new home. It shows that a show is a seller that the buyer is serious about moving forward on the purchase of their home.
So. In that regard you can actually think of an emd kind of like a security deposit whenever it comes time to buy a home so if you re putting it if it s so let s put their home on the market. And you put down this emd. Then it s gonna let them know.
It s okay for them to take the house off the market because you put up money in good faith to secure that property moving forward into the escrow phase. So then that brings up point number two so how much is it usually usually earns money deposits will range anywhere between 1 and 3 of the purchase price of a. Property so if we think about a purchase price of. 500000 so let s say you re.
Out. There. Buying a 500000. Home and let s say that your down payment is 10.
We ll get to that in point 3. But let s say the arndt s may deposit. Was. 3 so 3 of.
500000 is a 15000. Earnest money deposit. That s the amount of money that you would need to be ready to put upfront into the escrow account and depending on where you are in the country. Escrow may be called settlement or it may be called closing and again just like the acronyms.
We use those terms interchangeably around the country..
So just keep that in mind. If you re watching this video. When i say escrow it may be called settlement or closing. Where you are so that brings us into point number three.
What is the difference between an earnest money deposit and a down payment well. We know that the ernst may deposit is a deposit of good faith or a security deposit on your new home right well a down pain is different that s the amount of money that you need to put down to buy your new home so back to that 500000. Example if we had a. 10 if you have if you re.
Buying a 500000 home and you re using a 10 down. Payment that. Means that s 50000. Well what happens with that ernst main deposit when it comes time to close escrow and close on your new home well that simple that ernst may deposit as actually going to be applied to your down.
Payment so back to the example of the. 500000 home if your. Earnest. Money deposit.
Was 3 and 3. Of 500000 is. 15000 and your down payment on the. Same.
500000 home was 10 that s 50000. So then the money that you would need to be prepared to pay at closing is actually going to be. 50000 minus. 15000 so your down payment minus your earnest money deposit leaving you a 35000.
That you need to have prepared to close on your new home. So. If you have any questions about that let me know the other thing that i d like to give you as a bonus tip today is how to avoid wire fraud. I mean with so many scammers and spammers out there these days and people with evil intentions.
It s very important that whenever you get ready to wire. That s how most of us do this process anymore. It s no longer the the cheque writing. It s a lot quicker through the wiring process.
But whenever you get ready to open up your escrow. And they say hey you re ernst may deposits do within. 24 to 72 hours. Whatever was negotiated in your contract then it s important to note that you need to call that escrow officer or title officer.
That sent you those wiring structures that should be the only person anywhere..
The united states really sitting in that be your agent shouldn t be your loan officer. It should be that actual sql officer or a title officer that sends you the wiring instructions give them a call when you receive that email. And verify that account number and routing information for more information about that go ahead and pop up the links on some other videos that i did about that in specific one of my lenders come in and chat about it so you can take away some tips. There if you have any questions about this or you have some useful tips that you want to share with us about ernst.
Many deposits or down payments. Please leave it in the comment section. Below as always feel free to reach out to me anytime. Love hearing from you and if you haven t already done so please go ahead and tap those thumbs up subscribe now and by all means share this video around you never know who is gonna help thank you and enjoy an amazing day all a fallen private consumption of private investment would shift the ad curve to the left such as this 281 the impact that this has on the equilibrium level output is clearly negative this economy would experience.
What is called a demand deficient recession visible as the difference between y1. The new equilibrium level and yf e. The full employment level in addition to recession. This economy would experience.
Some price level instability in the form of deflation. As average prices in the economy would fall from pe to pe. 1. A decrease in aggregate demand caused by fall and consumption and investment has several negative effects on this nation s economy including a decrease in the price level or deflation and a decrease in national output or recession and a rise in unemployment.
All three of these are negative for the nation s economy and a government may choose to intervene to try to stimulate the amount of economic activity and return the economy to full employment so the goal of a fiscal policy in this case would clearly be to shift aggregate aggregate demand back out to the point where it intersects a s at the full employment level. What policies could the government use to stimulate aggregate demand. And move the economy back to full employment clearly what is needed is an expansionary fiscal policy as we explained earlier expansionary fiscal policies include decreases in taxes or increases in government spending. But how would each of these affect.
Aggregate. Demand and help get the economy back to full employment first of all let s talk about what kind of taxes are decreased. Here taxes might include income taxes on households. What effect would a decrease in household income taxes have on aggregate demand we re going to do a little transition mechanism here.
Which will show how a fall and income taxes will or possibly could increase the level of aggregate demand in the economy so let s assume the government lowers income taxes on households this of course means that households have more disposable income which refers to the income of households after taxes have been paid an increase in disposable income leads to an increase in household consumption of course the abbreviation for consumption is c. And as we ve learned in previous video lessons c or consumption is a component of aggregate demand. So an increase in household consumption. Should increase the level of aggregate demand and economy and help move the economy back to full employment as we see on the right so a decrease in taxes and households increases.
Disposable income. Which should increase consumption and stimulate aggregate demand or expand output back to the full employment level. Now. That s one option so we ll call that policy option.
1. The second fiscal policy. Option of course is a direct injection of government spending. So government could increase the amount of taxpayer money that it spends on things such as infrastructure or public works or defense or education or health care.
All of these types of spending can be summarized with the abbreviation g for government spending as we learned in previous video..
Lessons. G. Is a component of aggregate demand. Therefore an increase in g.
Should shift the ad curve back out or increase aggregate demand. Which will have the effect of reversing the deflation in the economy. In other words price level should rise and we should have once again a stable price level should also increase the level of output and economy from y1 back to yf e and employment should increase therefore unemployment should fall. These are all three positive things for the nation s economy and they all represent an expansion of economic output of course.
The decrease in tax is intended to have the same consequences. Lower and income taxes and households should lead to some demand pull inflation. Returning price levels to the full employment level and output to the full employment level and unemployment should return to a lower rate corresponding with the natural rate of unemployment so what we ve seen here is the use of expansionary fiscal policy in the form of decreasing taxes or increase in government spending used to return an economy back towards its full employment level. Following a decrease in aggregate demand due to a decrease in private consumption and investment so what we ve just shown is the use of expansionary fiscal policy clearly expansionary fiscal policy can be used during a recession to help an economy return to full employment so next we re going to talk about the use of contractionary fiscal policy and try to understand when a government may wish to increase taxes or decrease government spending.
Let s assume something in the economy happens that causes. Aggregate demand to increase and therefore causes severe demand. Pull inflation something that may cause cause. This could be a depreciation of the nation s currency or a fall in the exchange rate in other words.
So if the nation s exchange rate gets weaker against other currencies. This will lead to an increase in exports from that country since other countries will find that country s goods cheaper as exports rise and imports fall in fact a weaker currency will also lead to a fall in imports. We will see an increase in the nation s net exports or xn. An increase in net exports causes aggregate demand to increase and shift to the right.
Which has several negative effects for the nation s economy. Including demand pull inflation. Causing the price level to rise and a decrease in unemployment. Now that may sound like a good thing.
But when an economy is already producing yf ii. It has what we would consider a healthy and desirable rate of unemployment in the economy. Anything lower than that anything lower than the natural rate of unemployment tends to be highly inflationary and additionally in the short run at least the level of national output will increase beyond the full employment level on our graph as an increase in net exports would cause aggregate demand to shift outwards as we see here to ad. One it would cause a relatively small increase in the level of output and employment in the economy to y1.
But a relatively large increase in the price level because resources are incredibly scarce now due to the very high level of output. There tends to be a lot of inflation. So we see demand pull inflation resulting from this currency depreciation. The exchange rate fell in the economy.
Causing net exports to rise and causing demand. Pull inflation of course. A high inflation rate erodes people s real incomes and reduces. The standards of living of the people in the nation over time since wages are not rising.
Our households will become poorer in real terms for this reason. The government may find it desirable to reduce the level of aggregate demand of the economy to do so the government can use contractionary fiscal policies as we learned earlier a contractionary fiscal policy consists of an increase in taxes and a decrease in government spending. Let s talk about how each of these can help correct the demand pull inflation that this economy is experiencing and return output to the full employment level and more importantly return inflation to a stable rate. An increase in the taxes on households will lead to a decrease in disposable income since households will have less money left over after they ve paid their taxes to the government as disposable income falls households will start to consume at a lower level and consumption as we know is an opponent of aggregate demand.
So a fall and consumption should cause aggregate demand to decrease and shift back to the left. And help return the economy back to its full employment level. So a fallen ad will bring that demand pull inflation down. So we ll see a fall in the price level.
Which. In this case would be desirable. It will bring the level of output back to the full employment level. Which again is desirable and unemployment will rise which would normally be considered a bad thing.
But since this economy was experiencing unnaturally low levels of unemployment. An increase in unemployment would actually be beneficial for the akana so one type of contractionary fiscal policy is an increase in taxes the other type of contractionary policy of course is a decrease in government spending government can cut back on its expenditures on public works projects on education on health care on defense on national parks on anything else government. Spends money on as the government reduces its own expenditures in the economy. Aggregate.
Demand will fall. And these desirable outcomes will result. Price levels will fall back to a stable rate national output will fall and unemployment will rise back to the natural rate of unemployment of course. These are all considered desirable in the case of demand pull inflation and the economy producing it ad.
One as we see on this graph has very high inflation and therefore we need to contract the level of output in the economy. To help bring down. These inflation rates. We have what s called an inflationary gap in this economy contractionary fiscal policies can help reduce that inflationary gap and get the economy back to full employment.
So this video lesson was just an introduction to the use of fiscal policy. Which consists of changing the level of taxation and government spending in order to achieve the three macroeconomic objectives of price level stability economic growth and full employment. When an economy is in a demand deficient recession expansionary fiscal policies consisting of lower taxes and increased government spending can help get the economy back to its full employment level. If an economy is experiencing demand pull inflation caused by a sudden.
Unexpected increase in aggregate. Demand. Contractionary policy is consisting of higher taxes. And lower government spending can be used to return or hopefully reduce the level of aggregate demand.
And get the economy back to a level of output at which prices are stable and unemployment is at its natural rate in our next. Video lesson we re going to discuss two possible outcomes of expansionary contractionary fiscal policy. Evaluating the effect that they may have an economy considering other variables beyond just the simple. ” .
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