1. Government Taxing and Spending
Fiscal Policy
Government Taxing and Spending

2. What is Fiscal Policy?
Government’s taxing and spending decisions to change the economy
Fix inflation
Fix recessions and high unemployment

3. Money we pay the government
Can increase or decrease
Taxes

4. Government purchases of resources or goods and services
Purchase from households and businesses
Can increase or decrease.
Government Spending

5. Two types of Fiscal Policy
Expansionary:
Putting money IN the economy
Used during a contraction to fix unemployment
Contractionary:
Taking money OUT of the economy
Used during expansions to fix inflation
Two types of Fiscal Policy

6. Type of Fiscal Policy Used Stage of the business cycle currently in
Change to Money Supply
Problem in the economy
Type of Fiscal Policy Used
GDP
UNEMPLOYMENT
PRICES
Stage of the business cycle currently in
Increase Taxes
Decrease
Inflation
Contractionary
Expansion
Decrease Taxes
Increase
Unemployment
Expansionary
Contraction

7. Type of Fiscal Policy Used Stage of the business cycle currently in
Change to Money Supply
Problem in the economy
Type of Fiscal Policy Used
GDP
UNEMPLOYMENT
PRICES
Stage of the business cycle currently in
Increase Government Spending
Increase
Unemployment
Expansionary
Contraction
Decrease Government Spending
Decrease
Inflation
Contractionary
Expansion

8. Government tax revenue is GREATER than government spending (expenditures)
Can help reduce government debt
Use excess money to pay off some debt
Budget Surplus

9. Government tax revenue is LESS than government spending (expenditures)
Can help increase government debt
Government has to borrow money to pay expenses
Budget Deficit

10. CONTRACTIONARY POLICY
Problem: Inflation
Solution: Increase Taxes
 If taxes increase, we get to keep less of our money.
When we have less money, we spend less 
This is called
MONEY
TAXES
CONTRACTIONARY POLICY

11. Problem: Recession and high unemployment Solution: Decrease Taxes
 If taxes decrease, we get to keep more of our money.
When we have more money, we spend more!
This is called

12. Problem: Recession and high unemployment Solution: Increase spending
If government spending increases, they are buying more goods or resources from us, so we get more money. 
When we have more money, we spend more!
This is called

13. CONTRACTIONARY POLICY
Problem: Inflation
Solution: Decrease spending
 If government spending decreases, they are buying fewer goods or resources from us, so we get less money
When we have less money, we spend less 
This is called
CONTRACTIONARY POLICY