idleness. For example, when the Canadian economy entered a major
global recession in 2009, the federal and provincial governments
increased their spending significantly in an attempt to dampen the decline
in aggregate output that was then occurring. Some critics argue that such
“fiscal stimulus” packages cannot increase overall output, since the
increase in government spending will simply displace private spending.
Others argue that recessions are caused largely by a reduction in private
spending, and that an increase in government spending can be an
effective replacement to sustain the level of economic activity. Such
debates lie at the heart of macroeconomic policy, and we have much to
say about them in this book.
Finally, government policy also figures prominently in discussions about
the determinants of economic growth. Can specific policies lead to an
increase in the availability of resources or to the more efficient use of our
existing resources? If so, are the benefits in terms of greater production
and consumption worth the costs of the resources inevitably involved in
the implementation of the policies? We will have much to say about the
determinants of economic growth at several points in this book.