This document provides an overview of macroeconomics and fiscal policy concepts including: 1) It discusses government budgets, taxes, spending, deficits, and debt. The current US debt is $24 trillion or $72,700 per person. 2) Fiscal policy tools like taxes and spending can be used to increase or decrease aggregate demand. Raising/lowering taxes and increasing/decreasing spending impact the economy in the short-run. 3) Government spending is funded through tax revenues, borrowing, or drawing down surpluses. Too much borrowing can "crowd out" private sector investment by raising interest rates. Simply providing more government services does not necessarily increase total spending in the economy.

2. Lecture 16
Macroeconomics

3. Opening
Prayer

4. Quiz Master

5. Chapter 17
The Government Budget
Taxes and Spending

6. Two Objectives
Unemployment
Inflation

7. Monetary
Central Bank
Tools
Reserve Ratio
Discount Rate
Open Market
Excess Reserve Rate
Fiscal
Government
Tools
Taxes
Spending
Aggregate Demand
Aggregate Demand
Aggregate Supply

10. Tax Revenues
Income Taxes
Social Security Taxes
Other

11. Types
Per Head
Flat
Progressive

13. Corporate Tax Rate
21% Flat Rate

14. Progressive
The more you earn, the
higher the rate

15. Types
Income
Sales
VAT
Property
Excise

16. De
fi
cits and Debt
Government
Spending and
Revenue

17. De
fi
cit
Spending greater
than revenue

18. Balanced Budget
Spending exactly
equals revenues

19. Surplus
Revenue greater
than spending

20. Debt
Accumulated deficits

21. Debt
$24 trillion
$72,700 per person

23. Why would you want
government to go into
debt?
Don’t have to pay
Future larger economy

24. Debt
Investment
Only if the return is
higher than the
interest rate

25. Chapter 18
Fiscal Policy

26. P4
Price
Level
Real GDP orY
Fiscal Policy and Negative Supply Shock
18
Long Run
Aggregate
Supply Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
P2
P3
In
fl
ation and
Recession
Stag
fl
ation

27. P2
Price
Level
Real GDP orY
Increase Aggregate Demand
Lower Taxes and/or Increase Spending
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1
Aggregate
Demand
17
Unemployment

28. P3
Price
Level
Real GDP orY
Decrease Aggregate Demand
Raise Taxes and/or Decrease Spending
18
Long Run
Aggregate
Supply
Short Run
Aggregate
Supply
19
P1 Aggregate
Demand
17
In
fl
ation

29. Where does
government get
money?
Crowding Out

30. More Taxes
Cancel
No effect

31. More Borrowing
Crowding Out
Increase interest
rates

32. Lower Taxes
People may just save
more and not spend

33. More Spending
Now get free stuff.
No new spending

34. Get a free iPhone
But your taxes
will go up to
pay for it
No change in total
spending

35. Where does
government get
the money?

36. GDP
= C + I + G + X - M

37. If there are inactive capitals
Output will increase
If all capitals are active
Prices will increase