1 / 12

Changes in the Federal Budget

Changes in the Federal Budget. How might decisions of the Federal government affect the economy?.

braima
Download Presentation

Changes in the Federal Budget

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Changes in the Federal Budget How might decisions of the Federal government affect the economy?

  2. The economy tends to fluctuate from good to bad to good (business cycle). Sometimes production, income and spending in the economy are low (may result in recession) and sometimes they are high (may result in inflation). • These fluctuations result from changes in spending which have a “ripple effect” (multiplier) in a positive or negative way.

  3. Sometimes the Federal government must step in to help the economy (give it a little push or pull it back a bit). It can do this by: • Spending more or taxing less • Increases overall spending in the economy • Spending less or taxing more • Decreases overall spending in the economy • This may lead to the government having too much money (surplus) or not enough money (deficit).

  4. Concepts • Business Cycle • Inflation • Multiplier Effect • Unemployment • Fiscal Policy • Deficit • Surplus • Debt

  5. Business Cycle (simplified) inflation? Peak positive growth growth recession recovery negative Trough depression?

  6. Fiscal Policy Notes • Together, the President and the Congress are responsible for creating and implementing a budget for every fiscal year. The President submits his suggestions (the budget) and the Congress decides on the details and then votes on it. • Not doing well this year, have not passed a budget this year. Sequester: 10% cut every department.

  7. Too Good ☺ Increase taxes so people will spend less money Too Bad ☹ Decrease taxes so people have more money to spend Fiscal Policy Notes When the economy is… TAXES taxes taxes

  8. Too Good ☺ Decrease government spending to cut economic growth Too Bad ☹ Increase government spending to encourage economic growth OR… When the economy is… SPENDING spending spending

  9. Too Good ☺ Increase taxes and decrease spending Think of an overinflated balloon or an out-of-control car Too Bad ☹ Decrease taxes and increase spending Think of an underinflated balloon or an out-of-gas car OR… When the economy is… Combination of both to fight INFLATION (high prices, overproduction) to fight RECESSION (low production and high unemployment)

  10. Government Debt and Deficit • When spending is BIG and taxes are small • Equals a BUDGET DEFICIT • Big bills but not enough $ to pay for them • Govt has to borrow money • When spending is small and taxes are BIG • Equals a BUDGET SURPLUS • Lots of money left over after paying bills • What to do with all the extra $?????

  11. Government Debt and Deficit • When deficits happen, the government must BORROW money. • This creates DEBT (the money we owe from lots and lots of deficit budgets over the years) • Dec 2010 National Debt = • $14.5 trillion (that’s $14,500,000,000,000) • This affects things like the value of the dollar. It may also affect interest rates! All of it affects you and me and many not so obvious ways. http://www.usdebtclock.org/

More Related