Fiscal Policy.

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Presentation transcript:

Fiscal Policy

What is fiscal policy for? Gov’t uses taxes/ spending to help economy grow During recession: stimulate  increase spending + cut taxes During expansion  decrease spending + raise taxes

Automatic stabilizers Begin working to stimulate economy as soon as needed (already in place; don’t need gov’t) Unemployment benefits Progressive income tax

Federal budget: surplus vs. deficit Surplus: revenue > spending Deficit: spending > revenue Deficit? Must borrow $ (bonds) National debt= gov’t unpaid debt Balanced budget: spending = revenues

Impact of National Debt We owe most of debt to ourselves (bonds) Paying Interest Must pay interest on national debt More debt = more interest = more taxes Interest Rate Fed gov’t borrows $ = less for citizens (increased interest rate) US National Debt Clock

The Federal Reserve & Monetary Policy

“Now I Get It” – The Federal Reserve Explained https://screen. yahoo