Transcript GLOBAL CONNECTIONS

GLOBAL CONNECTIONS
ECONOMICS
What are taxes?
Taxes
TAXES
• TAXES ARE THE INCOME
OF THE GOVERNMENT. IT
USES THIS MONEY TO PAY
FOR SERVICES
TYPES OF TAXES
• INCOME
• SALES
• PROPERTY
• EXCISE
WHY DO WE PAY TAXES?
• PAY FOR SERVICES
• REDISTRIBUTE INCOME
• AID CERTAIN REGIONS
• IMPROVE NATION’S
ECONOMY
BUDGET
• GOVERNMENT USES A
BUDGET TO PLAN HOW IT
WANTS TO SPEND ITS
MONEY
3 TYPES OF BUDGETS
• 1. SURPLUS
–INCOME > SPENDING
• 2. DEFICIT
–INCOME < SPENDING
• 3. BALANCED
–INCOME = SPENDING
DEFICITS AND DEBTS
• DEFICITS-WHEN INCOME
IS LESS THAN SPENDING
IN ANY ONE BUDGET
• DEBT-ACCUMULATION OF
ALL PAST DEFICIT
BUDGETS
MONETARY POLICY
• POLICY THAT INVOLVES
CHANGING THE RATE OF
GROWTH OF THE SUPPLY
OF MONEY IN
CIRCULATION TO AFFECT
THE AMOUNT OF CREDIT
Translation Please…
• Monetary policy is when the government
either increases money supply (puts more
$$ on the streets) or decreases money
supply (takes $$ off of the streets)
• Reasons for increase: To combat
unemployment and a recession
• Reasons for decrease: To slow inflation
REGULATING THE MONEY
SUPPLY
How does the government change
the money supply?
• 1. BUYING AND SELLING
GOVERNMENT SECURITIES
• LIKE A SAVINGS BOND
MONEY SUPPLY
• 2. CHANGING THE
DISCOUNT RATE
• INTEREST RATE THE FED
CHARGES ITS BANKS TO
BORROW MONEY
• RATE
BORROW
• RATE
BORROW
MONEY SUPPLY
• 3. REGULATING THE
RESERVE REQUIREMENTS
• AMOUNT (%) OF DEPOSITS
BANKS ARE REQUIRED TO
KEEP IN THEIR VAULT
• HIGHER % LEND
• LOWER % LEND
FISCAL POLICY
• FEDERAL GOVERNMENT’S
USE OF TAXATION AND
SPENDING POLICIES TO
AFFECT OVERALL
BUSINESS ACTIVITY
Fiscal Policy
Why use fiscal policy?
• Control Demand and economic activity
– Times of low economic activity= stimulate
economic growth and work towards full
employment
– Times of high economic activity= use to stop
inflation