Fiscal Policy How the government collects and spends money to meet broad economic goals.

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Presentation transcript:

Fiscal Policy How the government collects and spends money to meet broad economic goals.

Taxes Proportional Taxes –Same proportion (percentage) from everybody –i.e. Flat Tax Progressive Taxes –More from the rich than from the poor –i.e. Progressive Income Tax Regressive Taxes –More from the poor than from the rich –i.e. Sales Tax

Tax Receipts

Fiscal Policy Strategies Supply-side Model (conservative) –Tax cuts create economic growth –Spending cuts lower inflation Keynesian model (Demand-side)(liberal) –Gov’t spending and taxing can cure economic ills. Unemployment: Spending creates jobs Inflation: Taxing deflates currency

Federal Budget Federal Spending - Federal Revenue Revenue > Spending = Surplus Spending > Revenue = Deficit Total Deficits = Federal Debt

Federal Debt