ss.912.e.2.9 analyze how changes in federal spending and taxation affect budget deficits and...

Standard 2Understand the fundamental

concepts relevant to the institutions, structure, and

functions of a national economy

SS.912.E.2.9SS.912.E.2.9Analyze how changes in federal Analyze how changes in federal

spending and taxation affect spending and taxation affect budget deficits and surpluses budget deficits and surpluses

and the national debt and the national debt

DefinitionsDefinitions

Balanced budgetBalanced budget: revenues = expenditures: revenues = expendituresBudget surplusBudget surplus: revenues > expenditures: revenues > expendituresBudget deficitBudget deficit: revenues < expenditures: revenues < expenditures

Budget surplus funds can either be spent as Budget surplus funds can either be spent as additional expenditures or used to pay off additional expenditures or used to pay off existing debtexisting debtFor now, assume surplus is used to pay off For now, assume surplus is used to pay off debtdebt

DefinitionsDefinitions

National deficitNational deficit: yearly budget deficit for : yearly budget deficit for federal governmentfederal government

National debtNational debt: cumulative amount of : cumulative amount of deficits or surplusesdeficits or surpluses

See national debt clock, See national debt clock, http://www.brillig.com/debt_clock/

Fiscal policyFiscal policy

Expansionary fiscal policyExpansionary fiscal policy: reduce taxes : reduce taxes and/or increase expenditures; goal is to and/or increase expenditures; goal is to expand or stimulate the economyexpand or stimulate the economy

Restrictive fiscal policyRestrictive fiscal policy: raise taxes and/or : raise taxes and/or decrease expenditures; goal is to slow decrease expenditures; goal is to slow economyeconomy

ScenariosScenarios

Expansionary policy will likely lead to Expansionary policy will likely lead to budget deficit (or shrink current surplus); budget deficit (or shrink current surplus); will result in larger national debtwill result in larger national debt

Restrictive policy will likely lead to budget Restrictive policy will likely lead to budget surplus (or shrink current deficit); will result surplus (or shrink current deficit); will result in smaller national debtin smaller national debt

Focus: Understanding Economics in Civics and Focus: Understanding Economics in Civics and GovernmentGovernment

Lesson 5 Government SpendingLesson 5 Government Spending

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LakeLake

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Video: Tim Hawkins the government canVideo: Tim Hawkins the government can

Video: Learn Liberty how big is the US Video: Learn Liberty how big is the US debtdebt

Those are big numbersThose are big numbers

Video: How much is a billion dollars-Dave Video: How much is a billion dollars-Dave WalkerWalker

The debate about how much government The debate about how much government should be involved in economic affairs has should be involved in economic affairs has

been ongoing for centuriesbeen ongoing for centuries

Two fun ways to summarize:Two fun ways to summarize:

Fear the boom and bust-Keynes vs HayekFear the boom and bust-Keynes vs Hayek

Fight of the century-Keynes vs Hayek Fight of the century-Keynes vs Hayek round 2round 2