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60 fiscal policy

  1. 1. Week of APRIL 11, 2011 AGENDA<br />Today’s Do Now<br />Hand-out Personal Finance WB<br />Notes: Fiscal Policy<br />CW: Fiscal Policy WS<br />CW: Demand vs. Supply Side<br />
  2. 2. Do Now (EOCT Review)<br />1. __________ are defined as all of the combination of goods and services that can be produced with a fixed amount of resources.<br />A. production possibilities B. factors of production C. opportunity costs<br /> <br />2. Which of the following is a factor of production?<br />A. Scarcity B. Full Employment C. Entrepreneurship<br />3. The central problem with which the discipline of economics is concerned with is<br />A. excess B. scarcity C. selfishness <br /> <br />4. The value of the next best alternative that is given up when one makes an economic decision is called the<br />A. opportunity cost B. trade-off C. minimal outcome<br />
  3. 3. Georgia Performance Standards<br />SSEMA3 (Social Studies Economics Macro #3)<br />The student will explain how the government uses fiscal policy to promote price stability, full employment, and economic growth.<br />Define fiscal policy.<br />b. Explain the government’s taxing and spending decisions.<br />
  4. 4. I. Macroeconomics: Fiscal Policy<br />
  5. 5. Definition: Fiscal Policy<br />Refers to those decisions by government related to <br />1. government spending<br />2. taxes<br />
  6. 6. A: Expansionary Fiscal Policy<br />Stimulates growth<br />Govt Spending<br />=<br />GROWTH<br />Taxes<br />
  7. 7. Increasing gov’t spending fights against recession and unemployment<br />
  8. 8. Ripple Effect<br />When Gov’t spends $ for G/S, it increases overall(aggregate) demand in the economy<br />Increasing business activity and economic growth <br />
  9. 9. RIPPLE EFFECT<br />GA OFFERS KIA 400M INCENTIVE<br />Pays land Owners 35.7 M-2200 Acres<br />Construction/ Buy New Homes<br />Consumer Goods<br />
  10. 10. RIPPLE EFFECT<br />GA OFFERS KIA 400M INCENTIVE<br />Contractors for building<br />Suppliers Buy Goods<br />Hire Workers<br />Hire Workers-2000<br />Buy Consumer Goods<br />Buy Consumer Goods<br />
  11. 11. RIPPLE EFFECT<br />GA OFFERS KIA 400M INCENTIVE<br />2500 Workers<br />Buy Consumer Goods<br />Suppliers- 2,000 workers<br />Hire Workers<br />Buy Consumer Goods<br />Buy Consumer Goods<br />
  12. 12. B. Contractionary Fiscal Policy<br />Reduces Growth<br />Gov’t <br />Spending<br />=<br />Taxes<br />Slows growth<br />
  13. 13. Contractionary<br />1. fights against inflation<br />2. As demand continues to rise so do prices (D-up P- up)- & inflation threatens<br />3. Gov’t can then reduce spending and reverse the ripple effect<br />
  14. 14. Contractionary<br />INCREASING TAXES FIGHTS AGAINST INFLATION!!<br />
  15. 15. Complete the <br />Fiscal Policy <br />Worksheet<br />
  16. 16. CW 4/12/10 Demand vs. Supply Side:<br />You have been assigned either demand-side or<br />supply-side economics. Answer #’s 1-3 from your assigned viewpoint. Use pages 447-454 of your textbook to assist you. Some answers may be based on general knowledge.<br />Who is the main advocate (historical character) for this viewpoint?<br />What political party today most closely associates with this viewpoint?<br />The U.S. is headed for a recession. In regards to fiscal policy, what should the government do? (List at least 2 specific examples)<br />4. Was the New Deal based on demand-side or supply-side economics? How do you know?<br />5. Do you think that demand-side or supply-side economics is best?<br /> Why?<br />
  17. 17. MACROECONOMIC THEORIES<br /> John Maynard Keynes<br />Father of Macroeconomics<br />1883- 1946<br />Advocated an aggressive role for the gov’t in a national economy- this is opposite of Adam Smith and laissez-faire<br />
  18. 18. Keynesian Economics<br />Demand Side Economics<br />Major concern of macroecon is to ensure aggregate demand is adequate to employ all productive resources (aggregate supply)<br />To cure a recession / depression only the govt has the spending capacity to jolt aggregate demand<br />The massive spending for WWII cured the Great Depression<br />
  19. 19. Reganomics= Supply Side Economics (1980’s)<br />1. Aim was to stimulate business and industry<br />2. Major tactics <br />A. Cut individual tax rates<br />B. Cut taxes on unearned income (like dividends)<br />C. Business tax incentives<br />D. Deregulation of Business – reduction of federal agency rules governing business<br />
  20. 20. MODEL OF THE BUSINESSCYCLE<br />Prosperity<br />Peak/Boom<br />Unemployment<br />Lowest, <br />Real GDP stops<br /> growing<br />Recovery<br />Recession<br />Recovery<br />Slow-Down<br />Lay-Offs<br />GDP declines for<br /> 2 consecutive quarters<br /> or 6 months<br />Expansion/Growth<br />Hiring, GDP increasing<br />Trough<br />Depression/Lowest Point<br />Unemployment Highest,<br /> Real GDP stops decreasing,<br /> Acute shortages<br /> & excess in manufacturing<br />