Welcome to Economics!  Turn your homework into the box  Grab your notebook  Find a seat where you are free from distractions and be seated when the bell rings.  Create a new entry for “Budget/Reserve”  When ready, come grab entrance quiz from Mr. Talcott  Turn your homework into the box  Grab your notebook  Find a seat where you are free from distractions and be seated when the bell rings.  Create a new entry for “Budget/Reserve”  When ready, come grab entrance quiz from Mr. Talcott

Do Now- “Federal Budget/Reserve”  Complete Entrance ticket silently and independently  When finished create a new entry for “Federal Budget/Reserve”  Complete Entrance ticket silently and independently  When finished create a new entry for “Federal Budget/Reserve” 5 minutes End

Reminder  ESSAY REWRITES ARE DUE TOMORROW!

Objective of the day:  I can Describe the actions of the federal budget in order to Compare and contrast deficit and surplus spending.  I CAN EXPLAIN THE ROLE OF THE FEDERAL RESERVE IN ORDER TO ANALYZE VARIOUS MONETARY POLICIES.  I can Describe the actions of the federal budget in order to Compare and contrast deficit and surplus spending.  I CAN EXPLAIN THE ROLE OF THE FEDERAL RESERVE IN ORDER TO ANALYZE VARIOUS MONETARY POLICIES.

QOD  W HO ACTUALLY CONTROLS THE MONEY IN THE U.S.?

Essential Language  Budget – Any outline or plan to spend money in different ways  Surplus – Having more than needed, extra  Deficit – Owing money due to excessive borrowing  Revenue – Money collected, in this case from taxes  Expenditures – Anything bought using revenue  Budget – Any outline or plan to spend money in different ways  Surplus – Having more than needed, extra  Deficit – Owing money due to excessive borrowing  Revenue – Money collected, in this case from taxes  Expenditures – Anything bought using revenue

What is the Federal Budget?  The federal budget is the government’s plan for the use of government revenues for a fiscal year.  Fiscal year: a 12 month financial period.  The federal budget is the government’s plan for the use of government revenues for a fiscal year.  Fiscal year: a 12 month financial period.

What is the Federal Budget Process?  First: The President develops of budget with is advisors.  Second: Congress analyzes the budget. Must be approved by the House and the Senate.  Third: Amended (Changed) budget is sent back to the President for his or her signature.  First: The President develops of budget with is advisors.  Second: Congress analyzes the budget. Must be approved by the House and the Senate.  Third: Amended (Changed) budget is sent back to the President for his or her signature.

Essential Take-Aways  Budget deficit: when the government spends more money than it collects.  Budget surplus: when the government collected more money than it spent.  Deficit spending: government policy of spending more than it takes in.  National debt: the amount of money that the federal government has borrowed which includes all deficits over previous years.  Budget deficit: when the government spends more money than it collects.  Budget surplus: when the government collected more money than it spent.  Deficit spending: government policy of spending more than it takes in.  National debt: the amount of money that the federal government has borrowed which includes all deficits over previous years.

How Can We Solve It?  Balanced budget: When the money spent by the government equals the tax revenues collected.  Increase revenues: Tax the citizens  Decrease Expenditures: Spend less  Balanced budget: When the money spent by the government equals the tax revenues collected.  Increase revenues: Tax the citizens  Decrease Expenditures: Spend less

Deficit Spending v. National Debt  Deficit Spending is the practice of spending money you don’t have. National Debt is the total amount borrowed.

As a group  There are 6 economies in the room.  Walk around the room and fill in the table for 3 economies. That are not your own.  You have to ask questions of your classmates, do not hand your paper to anyone else.  Once finished, return to your desk and silently wait for directions.  There are 6 economies in the room.  Walk around the room and fill in the table for 3 economies. That are not your own.  You have to ask questions of your classmates, do not hand your paper to anyone else.  Once finished, return to your desk and silently wait for directions. 5 minutes End

Cash Aphorisms Silently walk to the corner of the room, with the saying that you most agree with. “Money can’t buy you love” “Money is the root of all evil” “Money makes the world go round” “More money, more problems” Silently walk to the corner of the room, with the saying that you most agree with. “Money can’t buy you love” “Money is the root of all evil” “Money makes the world go round” “More money, more problems”

Vocabulary Preview  Money Supply: the amount of money in circulation (in the community)  Reserves: The amount of money the bank has to keep locked up  Interest: The extra money you pay to the lender when you borrow  Government Securities: a piece of paper from the Government promising they’ll pay you a certain amount in the future  Money Supply: the amount of money in circulation (in the community)  Reserves: The amount of money the bank has to keep locked up  Interest: The extra money you pay to the lender when you borrow  Government Securities: a piece of paper from the Government promising they’ll pay you a certain amount in the future

The Federal Reserve  The Federal Reserve Bank (or Central Banking Authority) controls the money supply in the U.S. This is called monetary policy.  The Fed is not part of the government but it works with the government  The Federal Reserve Bank (or Central Banking Authority) controls the money supply in the U.S. This is called monetary policy.  The Fed is not part of the government but it works with the government

Three Monetary Policies  Reserve Requirement  Government Securities  Discount Rate  Reserve Requirement  Government Securities  Discount Rate

The Reserve Requirement The Reserve Requirement is the percentage of its customers’ deposits that banks must keep in the vault  Raise the Reserve Requirement >> Money Supply Decreases  Lower the Reserve Requirement >> Money Supply Increases The Reserve Requirement is the percentage of its customers’ deposits that banks must keep in the vault  Raise the Reserve Requirement >> Money Supply Decreases  Lower the Reserve Requirement >> Money Supply Increases

Government Securities The buying and selling of Government Securities by the Fed. The Fed can buy or sell Gov. Securities.  Sell Government Securities >> Money Supply Decreases  Buy Back Government Securities >> Money Supply Increases The buying and selling of Government Securities by the Fed. The Fed can buy or sell Gov. Securities.  Sell Government Securities >> Money Supply Decreases  Buy Back Government Securities >> Money Supply Increases

Discount Rate The discount rate is the interest rate the Fed charges a bank for a loan. The discount rate can be raised or lowered.  Raise the Discount Rate >> Money Supply Decreases  Lower the Discount Rate >> Money Supply Increases The discount rate is the interest rate the Fed charges a bank for a loan. The discount rate can be raised or lowered.  Raise the Discount Rate >> Money Supply Decreases  Lower the Discount Rate >> Money Supply Increases

Thumbs up, Thumbs Down  The government sells securities to citizens  The amount of money banks must keep in their vaults goes up  The interest rate on bank loans decreases  Reserve requirement doubles  Discount rate plummets  Hurry, hurry! The government is buying back all outstanding Securities!  The government sells securities to citizens  The amount of money banks must keep in their vaults goes up  The interest rate on bank loans decreases  Reserve requirement doubles  Discount rate plummets  Hurry, hurry! The government is buying back all outstanding Securities!

With a partner  Discuss the following scenarios with your partner.  Using complete sentences, suggest potential monetary policies  Make sure you answer all parts of the question.  Discuss the following scenarios with your partner.  Using complete sentences, suggest potential monetary policies  Make sure you answer all parts of the question. 10 minutes End

By yourself  Independently read and annotate “The Federal Reserve”  Answer the questions in at least 3-5 complete sentences and in your own words!.  If you finish early, move onto the extra credit  Independently read and annotate “The Federal Reserve”  Answer the questions in at least 3-5 complete sentences and in your own words!.  If you finish early, move onto the extra credit

Homework  Find your last article on The Federal Reserve  This should be specific to Monetary policy  Due next class.  Find your last article on The Federal Reserve  This should be specific to Monetary policy  Due next class.