Unit 14 government spending and revenue


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Unit 14 government spending and revenue

  1. 1. Unit 14 Please use this to complete your mastery assignments! Using this will ensure mastery!
  2. 2. The Budget <ul><li>A Federal Budget is a plan for government expenditures and revenues for a specified period, usually a year </li></ul><ul><li>The budget is how the government decides to spend and raise money. </li></ul><ul><li>A Budget Resolution is an agreement within congress about totals revenues and spending for the year. It sets targets for how much will be spent in various categories </li></ul>
  3. 3. The Budget Continued <ul><li>A government’s budget deficit is when a government spends more than it collects. It is the difference between what is spent and collected in taxes. </li></ul><ul><li>Debt is money that has been borrowed but has not been paid back. </li></ul><ul><li>Balanced Budget - When spending equals revenue, this is known as a balanced budget (Revenue=Spending) </li></ul>
  4. 4. Fiscal Policy <ul><li>Fiscal policy deals with changes in government spending and taxation. Remember… government expenditures and taxes = fiscal policy </li></ul><ul><li>Fiscal policy is carried out by the legislative and executive branches . </li></ul><ul><li>The government collects taxes in order to finance expenditures on a number of public goods and services —for example, highways and national defense. </li></ul><ul><li>Appropriations Bills are money bills passed through Congress that authorize government spending. </li></ul>
  5. 5. # 1Government Expense <ul><li>The main government expense is Social Security. </li></ul><ul><li>Social Security gives money to retired persons and the disabled. </li></ul><ul><li>Largest government expenditure due to the number of old people growing: retirement age 65. </li></ul><ul><li>This makes it difficult to cut the budget because the money is going to help the disadvantaged such as the elderly and the poor. </li></ul><ul><li>Another large expense if government healthcare in the form of Medicare/Medicaid . Medicare is healthcare for the elderly . Medicaid is healthcare for the poor. These are guaranteed benefits for those who qualify under government transfer programs. </li></ul>
  6. 6. Other Top 3 Federal Expenditures <ul><li>2. National Defense: Government has to pay for military bases, FBI, CIA, NSA, Secret Service, military salaries. </li></ul><ul><li>3. Income Security: Government subsidies to veterans, railroad, and coal workers. </li></ul><ul><li>4. Healthcare: Medicare/Medicaid Healthcare assistance to elderly and infants and low-income. </li></ul>
  7. 7. Revenue <ul><li>Top 4 sources of government revenue </li></ul><ul><li>Individual income taxes and payroll taxes now account for four out of every five federal revenue dollars . Payroll taxes are deducted from a worker's paycheck to fund Social Security and Medicare. </li></ul><ul><li>Corporate income taxes contribute another 12 percent. </li></ul><ul><li>Excise taxes </li></ul><ul><li>Estate and gift taxes </li></ul><ul><li>Intergovernmental revenue is money that one level of government receives from another level such as when states receive money from the federal government. </li></ul>
  8. 8. Taxes <ul><li>Income taxes are taxes a person pays on the income he or she earns. Income taxes are graduated taxes meaning that the more you make, the more tax you pay. </li></ul><ul><li>Sales Taxes are taxes placed on purchases. States levy sales taxes. </li></ul><ul><li>Property taxes are taxes that people pay on the land and houses that they own. Property taxes are assessed on value of the property. Property Taxes are used to pay for government administration and expenses for things such as police officers, firefighters, and paramedics. Property tax also helps pay for services including community programs, parks, civic centers, libraries and schools. School districts also receive a large portion of property taxes. </li></ul>
  9. 9. Types of Taxes Government Can Implement <ul><ul><li>Progressive </li></ul></ul><ul><ul><ul><li>Increase in proportion to income </li></ul></ul></ul><ul><ul><ul><li>People/Businesses with higher income pay not only higher taxes, but at a higher rate </li></ul></ul></ul><ul><ul><li>Regressive </li></ul></ul><ul><ul><ul><li>Decrease in proportion to income </li></ul></ul></ul><ul><ul><ul><li>People/Businesses with higher income pay taxes at a decreased percentage </li></ul></ul></ul><ul><ul><ul><li>Ex. Sales Tax </li></ul></ul></ul><ul><ul><li>Proportional </li></ul></ul><ul><ul><ul><li>Rate remains constant even if though the amount being taxed increases </li></ul></ul></ul><ul><ul><ul><li>Ex. Property Tax </li></ul></ul></ul>
  10. 10. The Business Cycle <ul><li>The business cycle is the upward and downward movement of the economy (growth and decline of the economy) </li></ul>
  11. 11. Phases of the Business Cycle <ul><li>Expansion </li></ul><ul><li>An expansion is an upturn of the economy that lasts at least two consecutive quarters of a year. </li></ul><ul><li>During an expansion, production and employment are up. </li></ul><ul><li>Peak </li></ul><ul><li>A peak is the top of the business cycle….period of prosperity. During a peak, production and employment are at their highest. </li></ul><ul><li>A boom is a very high peak, when things in the economy are at their absolute best. </li></ul>
  12. 12. The phases explained… (cont.) <ul><li>Contraction </li></ul><ul><li>The economy as a whole is in decline during a Contraction . Production, employment and business activity starts to slow down and decline. </li></ul><ul><li>A contraction is after the peak but before the trough. </li></ul><ul><li>A recession occurs if a contraction is severe. Recessions tend to be shorter than expansions, with the average recession lasting about a year. </li></ul><ul><li>Trough </li></ul><ul><li>A trough is the lowest point of the business cycle. (the bottom). It occurs when real GDP levels off and slowing begins to increase. </li></ul><ul><li>In a trough , the production and employment are at their lowest. </li></ul><ul><li>A deep trough is called a slump or a depression. A depression is a large recession and is the worst part of the business cycle for the economy. </li></ul>
  13. 13. Economic Indicators <ul><li>Economic indicators are economic statistics that tell the government how well the economy is doing and how it will do in the future. (Measuring the Economy) </li></ul><ul><li>Examples: </li></ul><ul><li>unemployment rate </li></ul><ul><li>Real GDP </li></ul><ul><li>The inflation rate </li></ul>
  14. 14. Top Economic Indicators <ul><li>Real GDP </li></ul><ul><li>M2 Money Supply—money in circulation </li></ul><ul><li>CPI-Consumer Price Index (Inflation) </li></ul><ul><li>PPI-Producer Price Index </li></ul><ul><li>Consumer Confidence Survey </li></ul><ul><li>Unemployment </li></ul>
  15. 15. Unemployment <ul><li>Unemployment are those within the civilian labor force who aren’t working. </li></ul><ul><li>Civilian Labor Force- -all civilians 16 years old or older who are either working or looking for work. </li></ul><ul><li>The percentage of people in the civilian labor force who are not working but are looking for jobs make up the unemployment rate. </li></ul><ul><li>When people lose their jobs, they are personally impacted by unemployment. People are forced to cut back on luxuries as well as basic needs such as health care. </li></ul><ul><li>Government programs such as Workforce provide services for the unemployed such as job training. In exchange for benefits, Workforce requires welfare recipients to exchange some of their labor to get benefits. </li></ul><ul><li>The Equal Pay Act of 1963 was passed by Congress to stop employers from discrimination by paying less income due to gender or race. </li></ul>
  16. 16. Inflation <ul><li>Inflation is an increase in the general level of prices. </li></ul><ul><li>The CPI (consumer price index) tracks inflation. </li></ul><ul><li>With the CPI, the government samples prices every month for about 400 products commonly used by consumers to keep track of inflation. </li></ul>
  17. 17. GDP <ul><li>Gross Domestic Product (GDP) </li></ul><ul><ul><ul><li>A measure of the economy’s output. The dollar value of all final goods and services produced in a country in a year. </li></ul></ul></ul><ul><li>Real GDP </li></ul><ul><ul><ul><li>Shows an economy’s production after the distortions of price increases have been removed. </li></ul></ul></ul><ul><li>Balance of trade is the difference between the value of a nation's exports and its imports. </li></ul>
  18. 18. Stocks and Bonds <ul><li>Stocks represent shares of a company. These shares give part of the ownership of the company to you, the share-holder. Your stake in that company is defined by the amount of shares that you, the investor, own. </li></ul><ul><li>Bonds are loans to a company, corporation or the government. You purchase the bond and that institution gives you a receipt (bond) for your loan with a promise to repay you with interest over a period of time in the future. Bonds are bought and sold on the open market </li></ul>
  19. 19. Common Stock vs Preferred Stock <ul><li>Common stock is ownership in a company…stocks traded on the open market. </li></ul><ul><li>Those who own these stocks earn a dividend from their share of the company profits. Some companies such as Microsoft don't pay dividends, and never have any intentions of doing so. </li></ul><ul><li>The obvious risk with common stock is that the price may fall and you risk losing what you have invested. A good thing about common stock is that you can not lose more than your initial investment. </li></ul><ul><li>Preferred Stock sold by companies and is then traded among investors on the secondary market. Preferred stock is less risky than common stock, therefore investors can expect less reward. </li></ul><ul><li>Like Bonds (which give interest payments to the owner), preferred stocks give regular dividends for a period of time. There is no hope for making big money (large capital gains) but these are also less risky than common </li></ul>
  20. 20. Mergers <ul><li>A Merger is a combination of two or more companies into one. </li></ul><ul><li>Mergers threaten competition so the government tries to limit them. </li></ul><ul><li>Vertical Mergers (AKA Vertical Integration)—This is when firms at different stages in the production chain merge (such as Oil companies) </li></ul><ul><li>Horizontal Mergers (AKA Horizontal Integration)- where competing firms in the same industry merge (Sprint merges with AT&T) </li></ul>
  21. 21. Monopoly <ul><li>Monopoly- --when a market is controlled by a sole provider of a good or service and there is no competition </li></ul><ul><li>Competition is maintained by the government by controlling monopolies. </li></ul><ul><li>Congress has tried to control monopolies and their powers by creating anti-trust laws. These laws are put in to ban monopolies and keep industries competitive. </li></ul><ul><li>Two examples of anti-trust laws: the Sherman Antitrust Act and the Clayton Act. </li></ul><ul><li>A type of monopoly that exist because there are high fixed costs in a particular industry is known as a Natural Monopoly . Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal. </li></ul><ul><li>Examples of natural monopolies include the telephone companies, water companies, and gas companies. </li></ul><ul><li>  </li></ul>