Download Chapter 15: Using Fiscal Policy

COURSE OUTLINE
Unit 1: Fundamentals of Economics
Economics and Choice
 Chapter 1:The Economic Way of
Thinking
 Chapter 2: Economic Systems
 Chapter 3: The American Free
Enterprise
Unit 2: Microeconomics
Market Economies at Work
 Chapter 4: Demand
 Chapter 5: Supply
 Chapter 6: Demand, Supply, and
Prices
 Chapter 7: Market Structures
Unit 3:
Types of Business Organizations
 Chapter 8: Types of Business
Organizations
Unit 4: Macroeconomics
Money and Banking
 Chapter 10: Money
Unit 5:
Measuring and Monitoring Economic
Performance
 Chapter 12: Economic Indicators
and Measurements
 Chapter 13: Facing Economic
Challenges
Unit 6:
The Role of Government in the
Economy
 Chapter 14: Government, State,
Local Revenue and Spending
 Chapter 15: Using Fiscal Policy
Unit 7:
The Global Economy
 Chapter 16: The Federal Reserve
and Monetary Policy
 Chapter 17: International Trade
Unit 8:
Personal Finance
 Chapter 11: Personal Finance &
Financial Markets
CP Economics Organizer
Chapter 15: Using Fiscal Policy
The Big Picture:
Fiscal Policy Fiscal policy is the use of government spending and taxation to stabilize the economy. Automatic stabilizers include transfer payments and
progressive taxation. When the economy is weak, automatic stabilizers work automatically to pump money into the economy; they take money out when
inflation is a problem. Discretionary fiscal policy involves deliberate government actions. Expansionary fiscal policy is used when the economy is weak. By
increasing government spending, decreasing taxes, or both, the government seeks to increase aggregate demand in order to increase GDP and decrease
unemployment. Prices and interest rates tend to rise as well. Contractionary fiscal policy is used when inflation is a problem. By reducing government
spending, decreasing taxes, or both, the government seeks to decrease aggregate demand, which halts the rise in prices. Output decreases, interest rates fall, and
unemployment increases. Deficits and the National Debt The federal budget is balanced when revenue and spending are equal in a given year. A budget deficit
means spending exceeds revenue. A budget surplus results when revenue exceeds spending. Spending to stabilize the economy is only one cause of budget
deficits. The need for public goods and services, entitlement programs, and national emergencies are also causes. Since 1970, the government has had a budget
surplus only between 1998 and 2001. The government finances deficit spending by borrowing. Public investors who buy government bonds hold about 60
percent of government debt. Almost half of these investors are the central banks of other countries. About 40 percent of federal debt is owed to government
trust funds, which invest excess revenues in government bonds. When the government outbids private bond interest rates in order to get the loanable funds the
result is the crowding-out effect. Money leaves the private sector and interest rates rise. The national debt is the total amount that the government owes. It is the
accumulated sum of all deficits minuses any surpluses or repayments. In 2006, the national debt totaled more than $8.4 trillion, equal to about 70 percent of
GDP.
Unit Pacing:
_____– What is Fiscal Policy?
_____ – Deficits and the National Debt
_____—RETEACHING ACTIVITIES
Section 1 & 3
_____— Chapter 15 Definitions Test
& TEST
_____-- Unit Benchmark #6 TEST
Homework
Key Terms and Phrases:
(Reading Assignments)
_____– Read p. 446450
_____—Read p. 462466
_____—Read p. 446466
1.
2.
3.
4.
Fiscal
Fiscal Policy
Expansionary fiscal policy
Contractionary fiscal
policy
5. Discretionary fiscal policy
6. Automatic stabilizers
7. National debt
8. Budget surplus
9. Budget deficit
10. Deficit spending
Essentials Question:
GPS
1. Explain how the government uses taxation and government spending to stabilize the economy.
2. Describe the role of the government with Fiscal Policy.
1. SSEMA3a
2. SSEMA3b
3. SSEMA1f
Course Website: http://vhs.gocats.org/apps/pages/index.jsp?uREC_ID=549730&type=u&pREC_ID=826211
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Milestone Practice Questions
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