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Fiscal policy SFLS
- 1.
- 2. Introduction to FiscalPolicy 3.) Fiscal Budget and Problems 1.) Goals and Types of Fiscal Policy 2.) How Fiscal Policy is Done 4.) Fiscal Policy Limitations
- 3. - is theuse of the federal budget to sustain economic growth and smooth 连出 the business cycle. Fiscal Policy AD = C + I + G + (X – M) - is the use of taxes, government transfers, or government purchases of goods and services to shift the AD curve. Reworded definition: 换句话说 1.) Goals and Types of Fiscal Policy
- 4. Time Long Run Short Run Inthe short run things go up and down and can be quite volatile挥发物 Business Cycle Econ Growth - is the use of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy - Basically, fiscal policy aims to stabilize economic growth, avoiding a boom and bust economic cycle.
- 5. Time Long Run Short Run Inthe short run things go up and down and can be quite volatile挥发物 Business Cycle Econ Growth - is the use of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy - Basically, fiscal policy aims to stabilize economic growth, avoiding a boom and bust economic cycle.
- 6. - An increasein government spending or decrease in taxes to increase AD. Expansionary Fiscal Policy AD = C + I + G + (X – M) Inflationary Fiscal Policy or Government spending Taxes ***Ceteris Paribus Definition with arrows: 换句话说 Shifts AD rightor / and 1.) Goals and Types of Fiscal Policy
- 7. AD = C+ I + G + (X – M) Government spending Price level GDP AD SRAS PE LRAS YN Y1 P1 AD1 1.) Goals and Types of Fiscal Policy - Government spends more in the economy and makes jobs, people have more money and increase consumption.
- 8. AD = C+ I + G + (X – M) Taxes Price level GDP AD SRAS PE LRAS YN Y1 P1 AD1 1.) Goals and Types of Fiscal Policy - Lower taxes means people have more money to use for consumption and also businesses have more money to increase investment spending.
- 9. AD = C+ I + G + (X – M) or Government spending Taxes ***Ceteris Paribus Definition with arrows: 换句话说 Shifts AD rightor / and 1.) Goals and Types of Fiscal Policy Contractionary Fiscal Policy Deflationary Fiscal Policy A decrease in government spending or increase in taxes to decrease AD.
- 10. Time Long Run Short Run Econ Growth -is the use of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy At this point use Contractionary Fiscal Policy At this point use Expansionary Fiscal Policy
- 11. Time Long Run Short Run BusinessCycle Econ Growth - is the use of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy - Basically, fiscal policy aims to stabilize economic growth, avoiding a boom and bust economic cycle.
- 12. Introduction to FiscalPolicy 3.) Fiscal Budget and Problems 1.) Goals and Types of Fiscal Policy 2.) How Fiscal Policy is Done 4.) Fiscal Policy Limitations
- 13. 2.) How FiscalPolicy is Done Automatic Stabilizers Discretionary Fiscal Policy Two ways the policy is implemented. Either automatically without having to change policy or by the direct change by lawmakers in response to economic changes.
- 14. - based onthe subjective judgment of policymakers in the moment to an attempt to directly affect the economy. Discretionary Fiscal Policy 在当下，政策制定者决定 Ways to accomplish it: - New Laws or Legislation 法规 2.) How Fiscal Policy is Done - New jobs programs / public works - Issue new Bonds
- 15. Ways to accomplishit: 2.) How Fiscal Policy is Done - A set of laws or legislation 法规 that occurs and has an immediate response without any official or government body having to take action. Discretionary Fiscal Policy Automatic Stabilizers - Progressive Taxes - Direct taxes on households income Poor RichAverage pay 10% pay 15% pay 20% As income and AD decrease the progressive taxes with “automatically” tax people less and visa versa.
- 16. 16 Types of Taxes DirectTaxes -Taxes based on ownership. -Paid directly to the government by people. -Example: -Income taxes, property taxes. Indirect Taxes -Taxes paid on a market transaction. -Sellers usually pay to the government. -Example: -sales taxes, VAT taxes.
- 17. Ways to accomplishit: 2.) How Fiscal Policy is Done - A set of laws or legislation 法规 that occurs and has an immediate response without any official or government body having to take action. Discretionary Fiscal Policy Automatic Stabilizers - Unemployment Benefits As income and AD increase people won’t need unemployment benefits so “automatically” changes and visa versa.
- 18. Ways to accomplishit: 2.) How Fiscal Policy is Done - A set of laws or legislation 法规 that occurs and has an immediate response without any official or government body having to take action. Discretionary Fiscal Policy Automatic Stabilizers - Progressive Taxes - Unemployment Benefits - New laws with permeant spending requirements
- 19. Introduction to FiscalPolicy 3.) Fiscal Budget and Problems 1.) Goals and Types of Fiscal Policy 2.) How Fiscal Policy is Done 4.) Fiscal Policy Limitations
- 20. - annual expendituresand tax receipts of the government. 支出和税收 Fiscal Policy Fiscal Budget 3.) Fiscal Budget and Problems
- 21. - annual expendituresand tax receipts of the government. 支出和税收 Fiscal Policy Fiscal Budget 3.) Fiscal Budget and Problems - if expenditures exceeds tax receipts.Budget Deficit 支出 税收>
- 22. In the USand other countries, it’s very common for governments to have constant deficits.
- 23. - annual expendituresand tax receipts of the government. 支出和税收 Fiscal Policy Fiscal Budget 3.) Fiscal Budget and Problems - if expenditures exceeds tax receipts.Budget Deficit 支出 税收> - if tax receipts exceeds expenditures.Budget Surplus 支出税收 >
- 24. And surpluses arevery uncommon…
- 25. - annual expendituresand tax receipts of the government. 支出和税收 Fiscal Policy Fiscal Budget 3.) Fiscal Budget and Problems - if expenditures exceeds tax receipts.Budget Deficit 支出 税收> - if tax receipts exceeds expenditures.Budget Surplus 支出税收 > Balanced Budget - if tax receipts equals expenditures. 支出税收 =
- 26. Insert a Government Balance Budget graphhere Ha Ha! I can’t find a picture for this, it almost never happens!
- 27. Fiscal Budget 3.) FiscalBudget and Problems Budget Deficit vs. Budget Surplus - The government borrows to finance a budget deficit and repays its debt when it has a budget surplus. 政府借到预算赤字融资。政府偿还其债务时，有预算盈余。 - The amount of debt outstanding that arises from past budget deficits is called national debt. 旧债从过去的预算赤字总额被称为国家债务。
- 28. Introduction to FiscalPolicy 3.) Fiscal Budget and Problems 1.) Goals and Types of Fiscal Policy 2.) How Fiscal Policy is Done 4.) Fiscal Policy Limitations 3.1) Budget Deficit Problems
- 29. 3.1) Budget DeficitProblems Crowding out: - Government spending and borrowing that may fail to increase AD and hurts 排挤 private investment. - When the government has to borrow, it needs to borrow from the private sector. This could be private individuals, pension funds or investment trusts. It is argued that if the private sector buy government securities this will crowd out 排挤 private sector investment. - Typically this deals with the increase of interest rates due to attempting to sell more bonds to finance debt.
- 30. 3.1) Budget DeficitProblems Crowding out: - Government spending and borrowing that may fail to increase AD and hurts 排挤 private investment. - There is a limited supply of money that banks have to lend out. If more investors want the money = the money becomes more valuable = interest rates increase But then higher interest rates will lead to investors not wanting it because now it’s more expensive. So if governments want to borrow more of this scarce money it can increase the interest rates and hurt some private investors.
- 32. 3.1) Budget DeficitProblems Long term debt: - Borrowed money has to be paid back with interest over time meaning to total costs will be higher. - Future budgets will have less discretionary spending ability due to having to pay back old loans Crowding out:
- 33. Introduction to FiscalPolicy 3.) Fiscal Budget and Problems 1.) Goals and Types of Fiscal Policy 2.) How Fiscal Policy is Done 4.) Fiscal Policy Limitations
- 34. Discretionary Fiscal Policy Limitations: - Politicalconflicts - Keynesians vs. Monetarists, vs. Conservatives Automatic Stabilizers 4.) Fiscal Policy Limitations
- 35. Remember short runideas…
- 36. versus long runideas…
- 37. Discretionary Fiscal Policy Limitations: - Politicalconflicts Automatic Stabilizers 4.) Fiscal Policy Limitations - By time policy is enacted the economy may have changed - Time lags Often it takes 1 or 2 years for the changes to cycle through the economy.
- 39. This policy wasenacted, but unemployment got worse before it stabilized.
- 40. Discretionary Fiscal Policy Limitations ofboth: Automatic Stabilizers 4.) Fiscal Policy Limitations - Poor information - Crowding out - Cause deficit / debt problems - Governments can be inefficient - changes the effectiveness - Depends on the size of the multiplier
- 41.
- 42. - is theuse of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy AD = C + I + G + (X – M) - Basically, fiscal policy aims to stabilize economic growth, avoiding a boom and bust economic cycle. 1.) Goals and Types of Fiscal Policy
- 43. - An increasein government spending or decrease in taxes to increase AD. Expansionary Fiscal Policy AD = C + I + G + (X – M) Inflationary Fiscal Policy or Government spending Taxes ***Ceteris Paribus Definition with arrows: 换句话说 Shifts AD rightor / and 1.) Goals and Types of Fiscal Policy
- 44. AD = C+ I + G + (X – M) or Government spending Taxes ***Ceteris Paribus Definition with arrows: 换句话说 Shifts AD rightor / and 1.) Goals and Types of Fiscal Policy Contractionary Fiscal Policy Deflationary Fiscal Policy A decrease in government spending or increase in taxes to decrease AD.
- 45. Time Long Run Short Run Econ Growth -is the use of the federal budget to sustain economic growth and smooth the business cycle. Fiscal Policy Use Contractionary Fiscal Policy Use Expansionary Fiscal Policy
- 46. - based onthe subjective judgment of policymakers in the moment to an attempt to directly affect the economy. Discretionary Fiscal Policy 在当下，政策制定者决定 Ways to accomplish it: - New Laws or Legislation 法规 2.) How Fiscal Policy is Done - New jobs programs / public works - Issue new Bonds
- 47. Ways to accomplishit: 2.) How Fiscal Policy is Done - A set of laws or legislation 法规 that occurs and has an immediate response without any official or government body having to take action. Discretionary Fiscal Policy Automatic Stabilizers - Progressive Taxes - Unemployment Benefits - New laws with permeant spending requirements
- 48. - annual expendituresand tax receipts of the government. 支出和税收 Fiscal Policy Fiscal Budget 3.) Fiscal Budget and Problems - if expenditures exceeds tax receipts.Budget Deficit 支出 税收> - if tax receipts exceeds expenditures.Budget Surplus 支出税收 > Balanced Budget - if tax receipts equals expenditures. 支出税收 =
- 49. Discretionary Fiscal Policy Limitations: - Politicalconflicts Automatic Stabilizers 4.) Fiscal Policy Limitations - By time policy is enacted the economy may have changed - Time lags
- 50. Discretionary Fiscal Policy Limitations ofboth: Automatic Stabilizers 4.) Fiscal Policy Limitations - Poor information - Crowding out - Cause deficit / debt problems - Governments can be inefficient - changes the effectiveness - Depends on the size of the multiplier
- 51. The End –but don’t forget the multiplier Thanks