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CHAPTER 29
Fiscal Policy
PowerPoint® Slides
by Can Erbil
© 2005 Worth Publishers, all rights reserved
What you will learn in this chapter:
What fiscal policy is and why it is an important tool in managing
economic fluctuations
Which policies constitute an expansionary fiscal policy and
which constitute a contractionary fiscal policy
Why fiscal policy has a multiplier effect and how this effect is
influenced by automatic stabilizers
How to measure the government budget balance and how it is
affected by economic fluctuations
Why a large public debt may be a cause for concern
Why implicit liabilities of the government are also a cause for
concern
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Fiscal Policy: The Basics
3
Sources of Tax Revenue in the
United States, 2004
4
Government Spending in the
United States, 2004
5
The Government Budget and Total
Spending
Fiscal policy is the use of taxes, government transfers, or
government purchases of goods and services to shift the
aggregate demand curve.
6
Expansionary and Contractionary Fiscal
Policy
Expansionary Fiscal Policy Can Close a Recessionary Gap
7
Expansionary and Contractionary Fiscal
Policy
Contractionary Fiscal Policy Can Eliminate an Inflationary Gap
8
The Multiplier Effect of an Increase in
Government Purchases of Goods and Services
9
How Taxes Affect the Multiplier
Automatic Stabilizers
Discretionary Fiscal Policy
10
Differences in the Effect of Expansionary Fiscal
Policies
11
The Budget Balance as a Measure of Fiscal Policy
expansionary fiscal policies
contractionary fiscal policies
12
The U.S. Federal Budget Deficit and the Business
Cycle
13
The U.S. Federal Budget Deficit and the
Unemployment Rate
14
The Actual Budget Deficit Versus the Cyclically
Adjusted Budget Deficit
15
Government Debt as a Percentage of GDP
16
U.S. Federal Deficit and the Federal Debt-GDP
Ratio since 1939
17
Japanese Deficits and Debt
18
The Implicit Liabilities of the U.S. Government
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The End of Chapter 29
coming attraction:
Chapter 30:
Money, Banking, and the
Federal Reserve System
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