Fiscal Policy Influence on the Economy

1. Fiscal Policy Influence on the Economy Government Taxing and Spending Policies

2. The health of a nation’s economy is influenced by governmental policy (fiscal policy) • Fiscal policy can be used to spur economic growth • Economic policy decision made by government result in both intended and unintended consequences Fiscal Policy Overview

3. Intended Results Unintended Results • What the government MEANT to happen • Spur economic growth • Increase consumer spending • Increase employment • What the government DID NOT MEAN to happen • Unforeseen problems • Backlash against programs/spending Effects of Fiscal Policy

4. Personal Income Tax – a percentage of gross income • Sales Tax – on items purchased • Property Tax – a percentage value of your land/house • Tariffs – placed on imports Government Taxing

5. Joking about Taxes What is the intended purpose of this cartoon?

6. Permanent Short Term • Social Security – retirement/disability • Overview of Information • Medicare– government funded health care coverage • Entitlements – items above, plus salaries and benefits for employees • Government Stimulus Checks – one time payments intended to spur spending • CARS – aka – “Cash for Clunkers” – intended to promote growth in struggling auto industry Government Programs

8. Social Security – • Medicare – • Stimulus Checks – • CARS - Unintended Effects of Programs

9. Intended Purpose – to encourage consumer spending on new vehicles • Boost the struggling American automobile industry • Production and Sales • Unintended Results – 6/10 top 10 cars sold were foreign models Top Ten Sales • Still promotes American economy growth • Many people who wanted to participate were ineligible • Unknown long-term effects – especially on employment • Increased government spending – incentive to buyers (discount financed by the federal government) Policy Example - CARS

10. Intended Effects Unintended Effects • Regulate commerce with foreign countries • Protects American jobs and farmers • Encourage American industry and production • Trading partners retaliate: reduce American exports by ½ (23 official protests) • Spike in unemployment • World trade decreased 66% between 1929 and 1934 Tax Example – Hawley-Smoot Tariff 1930: increased taxes on agricultural and industrial imports to record high