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GRAPHING FISCAL POLICY

GRAPHING FISCAL POLICY. Warm Up: What is causing the nation to be in a recession? What could cause the nation to experience a period of inflation ?. To Fight Recession…. Need to pursue ________ fiscal policy!!! This mean, taxes ____ and government spending ____

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GRAPHING FISCAL POLICY

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  1. GRAPHING FISCAL POLICY

  2. Warm Up: • What is causing the nation to be in a recession? • What could cause the nation to experience a period of inflation?

  3. To Fight Recession… • Need to pursue ________ fiscal policy!!! • This mean, taxes ____ and government spending ____ • So, is the government running a budget surplus or a budget deficit??? Explain.

  4. Expansionary Fiscal Policy • Running a budget deficit… • Spending more money than they are collecting in taxes • Therefore, needs to get the extra money by taking out more loans!!!

  5. Illustrating the Solution:Recessionary Gap Graph PL ASLR AS • Too _______ spending is causing Y ____ Y* I AD Y Y* O/E

  6. Fixing the Problem: ________________ FISCAL POLICY!!! • T___ DI___ C & I __ AE__ AD___ PL & O/E___ • G___ AE__ AD___ PL & O/E___ • Transfer Payments DI__ C & I__ AE__ AD___ PL/OE

  7. Fixing the Problem:ELIMINATE THE RECESSIONARY GAPUSING EXPANSIONARY FISCAL POLCIY! • C___ • I____ AD____ PL & O/E___ • G___

  8. Fixing the Problem:Eliminate the Recessionary Gap UsingExpansionary Fiscal Policy PL AS PL2 PL1 AD AD2 O/E1 O/E2 O/E

  9. To Fight Inflation… • Needs to pursue _________ fiscal policy • This mean, taxes____ and government spending ______ • The government will be running a budget ______.

  10. Contractionary Fiscal Policy • Since they are collecting more tax revenue while government spending is decreasing, they will have left over money.

  11. Illustrating the Problem:Inflationary Gap Graph PL ASLR AS Too ______ spending is causing Y ____ Y* I AD Y* Y O/E

  12. How to Fix the Problem:________________ FISCAL POLICY!!! • T___ DI___ C & I __ AE__ AD___ Pl & O/E___ • G___ AE__ AD___ PL & O/E___ • Transfer Payments DI__ C & I__ AE__ AD___ PL/OE

  13. Fixing the Problem:ELIMINATE THE INFLATIONARY GAPUSING CONTRACTIONARY FISCAL POLCIY! • C___ • I____ AD____ PL & O/E___ • G___

  14. Fixing the Problem:Eliminate the Inflationary Gap UsingContractionary Fiscal Policy PL AS PL1 PL2 AD AD2 O/E2 O/E1 O/E

  15. POLICY INSTRUMENTS Systems set in place by the government to help achieve macro goals

  16. POLICY INSTRUMENTS 1.)Fiscal Policy - govt using tax or spending to stabilize the economy 2.) Monetary Policy - our national bank, the FEDERAL RESERVE, controls the Money Supply to stabilize the economy 3.) Foreign Economic Policies - trade policies that attempt to keep imports in line with exports 4.) Income Policies - govt actions to moderate inflation by direct steps (ex: legislated wage and price controls)

  17. External Variables Things we have no control over…but they still affect the overall outcome of our economy • Weather • Foreign output • Revolutions or Wars

  18. Video • “Unintended Consequences -- The Great Depression” • Take Notes!

  19. Wrap-Up • What are some of the similarities between the problems leading up to the Great Depression and today? • What could have been done to avoid the Great Depression from being “Great?” • What is the multiplier effect? • What is “The Fed” (Federal Reserve) and what is it responsible for? • How does cash get it’s value?

  20. Wrap Up: Fill In The Correct Answer • To correct an inflationary problem in the U.S., the AD curve needs to shift to the __________. • Using an expansionary fiscal policy results in taxes _________. • Supporters of fiscal policy believe that inflation can be reduced by __________ ________________. 4. Keynes believed that spending money was the key to controlling the economy during a _____________. 5. Full employment implies that unemployment is ________________.

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