1. Warm Up – May 14
Answer the following questions on a post it – Unit 7 Review
1. What is the difference between microeconomics and macroeconomics?
2. What is scarcity? Why will it always exist?
3. What is a trade-off and an opportunity cost?
4. Describe the difference between a market and command economy
5. What are supply and demand?
6. What are the four factors of production?
7. Difference between the organization of a sole proprietorship, partnership, and corporation
8. Difference between Fiscal and Monetary Policy
9. Describe the difference between Expansionary and Contractionary policies

2. UNIT 7: The ECONOMY
Fiscal Policy

3. What is Fiscal Policy? Reading
Answer the following questions on the same post it as the warm up:
1. What is a fiscal policy? How is it different than monetary policy?
2. According to Keynesian economics, how can a government influence macroeconomic productivity?
3. What does a fiscal policy attempt to find a balance between?
4. What effects would decreasing taxes and increasing spending have?
5. Why would a government need to increase taxes and decrease spending?
6. What is one of the biggest obstacles that policymakers face?

4. What is Fiscal Policy?
Government decisions on spending and taxation that are intended to improve or maintain the economy. The decisions the government makes has a HUGE impact on the economy.

5. Who makes Fiscal Policy?
Congress and the President make fiscal policy through the federal budget.
They decide how raise funds/what to cut.
The Federal Reserve (another government agency) DOES NOT make fiscal policy. (They make monetary policy)

6. What is the Federal Budget?
The Federal budget is:
a written document that shows the money the gov’t receiving and can spend for that year

7. Fiscal Policy and the Economy
Every Fiscal Year (a 12 month period, not necessarily from Jan. to Dec.) the government makes a new budget. The total level of government spending can be changed to help increase or decrease the output of the economy

8. Expansionary Policies
Expansionary Policies: Policies that try to increase the output of the economy
During a contraction or recession, the government can do two things:
Decrease Taxes Or Increase Gov’t Spending
Why would you try to decrease taxes/increase spending to grow the economy?

9. Decreasing Taxes/Increasing Government Spending
Gives people more money to spend
More money = Demand
More demand = Production
More production = Jobs
More jobs = Demand

10. Who favors which policy?
Decreasing Taxes
Favored by Republicans
Let people decide what to spend their money on and let those who earned the money benefit from it.
Increase Gov’t Spending
Favored by Democrats
Government should spend to redistribute wealth to the poor, rather than give the rich a tax cut

11. Contractionary Policies
Contractionary Policies: Policies that try to decrease the output of the economy During a period of excessive inflation (during a period of expansion), the government can do two things: Increase Taxes OR Decrease Spending

12. Increase Taxes/ Decrease Spending
Less money in economy
Less money = Demand
Less demand = lower inflation

13. Who favors which policy?
Neither party favors Contractionary Fiscal Policies, But at times it is necessary to increase taxes

14. Problem with Fiscal Policy
It is unpopular to raise taxes or cut government spending. So, elected officials worried about re-election rarely do either.
Ex. In 1984, Walter Mondale ran for president saying a slight tax increase would help equalize the U.S. economy. Ronald Regan defeated him in one of the biggest landslides in U.S. history!
If the government cuts taxes, they have less money to spend or they go into debt.
The federal debt is in the trillions of dollars, so the government has to borrow money by selling bonds. These bonds have to be paid back with interest, costing the government more money!

15. TOD – May 8
Answer the following questions on the same post it as the warm up:
What is fiscal policy? Who makes fiscal policy?
What is the federal budget? What does the federal budget authorize?
What is the difference between expansionary and contractionary policies?
What are the benefits of decreasing taxes and increasing spending?
What are the benefits of increasing taxes and decreasing spending?