Fiscal Policy
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Transcript Fiscal Policy
Fiscal Policy
EQ: What’s all the
commotion about
government spending?
Review Ch 9
Get
in groups of two :
Group member 1 – using the text, develop 4
questions from ch 9 using the following
terms: Personal Income Tax, Regressive,
Excise, and Payroll
Group member 2 - using the text, develop 4
questions from ch 9 using the following
terms: Progressive, proportional, FICA, and
sales tax
Once you have your questions developed
(and written down), trade questions and
each answer
Where does the
government spend our
money? Where do you
think?
Definition
Fiscal
- Government’s attempt to regulate
the economy by taxation and
government spending
Two Types of Fiscal
spending
Automatic/mandatory
Policy
that is
already in
legislation to take
affect without
additional work by
Congress
Discretionary
Policy
that requires
a new act of
Congress to
establish.
Discretionary
EOCT Review
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Draw a Productions Possibilities Curve showing the trade-off
between guns and butter. What do “guns” and “butter”
represent?
Name 4 factors that affect demand.
Name 4 factors that affect supply.
Draw a perfectly elastic demand curve.
Draw a perfectly inelastic demand curve.
What happens at equilibrium for supply and demand?
At what point is profit maximizing level of output reached?
Minimum wage is an example of a price ___________. What
happens with a price floor?
Describe the differences between perfect competition and
monopoly.
What is the equation for total revenue?
Fiscal Policy
Expansionary Policy
Increases
AD
Increases GDP
Stimulates the
economy
Gets us out of a
recession
Contractionary
Policy
Decreases
AD
Decreases GDP
Slows down the
Economy
Prevents inflation
Review
What
are two types of fiscal spending?
Explain
What type of policy decisions are used
when the economy is contracting or in
recession?
What type of policy decisions are used
when the economy is expanding or
experiencing high inflation?
Fiscal Policy Tools
Expansionary
Cut
in Taxes
Personal/Corporate
Income
Increase
in
Government
spending
Deregulation of
Business
Increase of social
programs
Contractionary
Increase
in taxes
Decrease in
Government
Spending
Increase in Business
Regulations
Cut in social
programs
Progressive Income
Tax Structure
Critical Thinking
Why
might the government want to
engage in expansionary fiscal policy?
Contractionary?
Obama’s Jobs Plan
Interpret the cartoon…
1 CDs; 2 CMs
Recap Video
http://www.youtube.com/watch?v=1qhJ
PqyJRo8
What is the objective for AD?
1.
The government cuts personal incometax rates.
2.
The government eliminates favorable
tax treatment on long-term capital gains.
3.
Incomes rise; as a result, people pay a
larger fraction of their income in taxes.
4.
As a result of a recession, more families
qualify for food stamps and welfare
benefits.
What is the objective for
AD?
5. The government eliminates the deductibility
of interest expense for tax purposes.
6. The government launches a major new
space program to explore Mars.
7. The government raises Social Security taxes.
8. Corporate profits increase; as a result,
government collects more corporate income
taxes.
9. The government raises corporate income
tax rates.