Economics - Fiscal Policy And Federal Budget

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Fiscal Policy

Back 1

fiscal policy is teh federal gov'ts use of of taxingt and expenditures (spending) to promote full employment, stable prices, and a growing economy.

HUGE IMPACT ON Economy

Front 2

Federal Budget

Back 2

federal budget is how much we expect to collect in taxes and how much we intend to spend

Front 3

fiscal year

Back 3

a twelve-month period that is not necessarily the same as hte January to December calendar year.

October 1-September 30 is Federal Govt fiscal year

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Federal Revenues by Source

Back 4

1. Individual Tax Payers
2. Social Security Insurance
3. Coporate
4. Customs Duties
5. Excise Tax
6. Estate and Gift

Front 5

Stae Revenue Comes from (source)

Back 5

1.236 billion REvenue
1. Ad-valorem tax
2. Income Tax
3. Business Tax
4. Fees
5. Social

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Tax Bases

Back 6

Target of the Tax;
Tax Base is the income, property, good, or service that is being taxed (subject of the tax)

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Tax Base Types

Back 7

1. Proportional Taxes
2. Progressive Taxes
3. Regressive Taxes

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Proportional Taxes

Back 8

A proportional tax is a tax where everyone pays the same percentage of tax like Social Security, everyone pays 6.5%

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Progressing Taxesr

Back 9

progressive tax is where someone pays more taxes as their incomes increase; (the more you make, the more percentage of your income you pay) example: if you make 20000, you may pay 10%, if you make 50000, you may pay 15% of your income in taxes

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Regressive Taxes

Back 10

regressive taxes - as your income increases, you pay less percentage in taxes; example if you make 10000, you pay 20%, you will pay only 10% if you make 50000

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Corporate Income Tax

Back 11

when gov't levies (requires a tax) on a corporation, the corporation passes the tax on to the consumer (buyer) so the corporation is sort of like a tax collector

Front 12

Corporate Income Tax (Buden of Tax)

Back 12

falls on consumer; the corporation collects the tax from the consumer;

so if govt ptus a tax on cars, the consumer pays when he buys the car

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Mandatory Spending

Back 13

money that lawmakers are required by law to spend on certain programs or to use for interest payments on the national debt.

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Discretionary Spending

Back 14

gov't spends money like it wants to on whatever it wants to spend it on (can make choice on what to spend money on)

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Entitlements

Back 15

An entitlement program is called a "social welfare" program.

People get these programs if they meet certain requirements.
Example: Social Security (at 62 years old), Medicare at 65 years old, Medicaid (based on how much money you make (income)

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Entitlement Programs

Social Security (entitlement by age)

Back 16

AGE
largest category of gov't spending

Front 17

Entitlement Programs

Medicare (entitlement by age)

Back 17

AGE
Medicare pays for certain health benefits for people over 65 years old

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Entitlement Programs

Medicaid (entitlement by income)

Back 18

INCOME

Medicaid benefits low-income families, some people with disabilities, and elderly people in nursing homes.

Medicaid cost shared by state and federal gov't.

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Discretionary Spending

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1. Defense Spending (highest)
2. Education
3. Training
4. Environmental Cleanup
5. National Parks
6. Scientific Research
7. Land Management
8. Farm Subdidies
9. Foreign Aid

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Mandatory Spending

Back 20

mandatory spending has increased nearly five times faster than discretionary spending

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Federal Policy and the Economy

Back 21

gov't spending can change to help increase or decrease the output in economy; govt can change spendint to help economy grow or slow down

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Federal Policy and the Economy

Two tyeps of Policy

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1. Expansionary Policies - increase output

2. Contractionary Policies - decrease output

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Expansionary Fiscal Policies

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1. Increase gov't spending to trigger a chain of events to increase GDP and creates jobs

2. Cutting Taxes - the gov't cut taxes so individuals and businesses have more money to spend and invest

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Expansionary Fiscal Policies

(What do they do for GDP)

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1. Increase Govt Spending
2. Cut Taxes

Expansionary Fiscal Policies increase AD and GDP

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Multiplier Effect

Back 25

every one dollar used in fiscal policy creates more than one dollar in economic activity

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Multiplier Effect

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Multiplier Effect Example
gov't spends money to build bridge
construction workers earn income
they spend money at stores and various busnesses
businesses boost their supply and hire more workers
So GDP increses at a level greater than the initial increase in spending

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Balancing Budget

Back 27

balance budget is where revenues equal spending; the money you take in is the same amount that you spend

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Budgey Surplus

Back 28

revenues exceed expenditures;

you earn more money than you spend so you have some left over (surplus)

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Budget Deficits

Back 29

expenditures (spending) exceed revenues

you spend more than you earn or take in

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American Budget

Back 30

spending is growing faster than revenue taken in

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National Debt

Back 31

total amount that gov't owes
(over time)

Currently - 13.6 Trillion dollars

debt is owed to whoever owns US treasure bonds, notes, and bills

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national DEFICIT

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the amount the gov't owes for one fiscal year ( spent more in one year than they took in that year)

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Government Securities

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1. treasury notes
2. treasury bills
3. treasury bonds

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What Countries are holding US Debt
(bought treasury bonds, notes, billls)

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1. China
2. Japan
3. U.K
4. Oil Exporters
5. Brazil
6. Carribean Banks
7. Hong Kong
8. Taiwan
9. Russia
10. Canada

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Problems of National Debt

Back 35

cover deficit spending; every dollars spent on a government security (bond, bill, note), is fewer dollar available for businesses and individuals to borrow and invest

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Spending Cuts alone

Back 36

spending custs alone will not pay for rising cost of entitlement programs )(social security, medicaid, medicare)

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Entitlement Spending (2)

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Entitlement spending (social security, medicaid, medicare)

expected to double by 2050

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Entitlement Spending (3)

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Entitlement spending (social security, medicaid, medicare)

expected to consume all revenues by 2052 ( all taxes (revenue) brought in will have to be used for entitlements