ss.912.e.2.9 analyze how changes in federal spending and taxation affect budget deficits and...
TRANSCRIPT
Standard 2Understand the fundamental
concepts relevant to the institutions, structure, and
functions of a national economy
SS.912.E.2.9SS.912.E.2.9Analyze how changes in federal Analyze how changes in federal
spending and taxation affect spending and taxation affect budget deficits and surpluses budget deficits and surpluses
and the national debt and the national debt
DefinitionsDefinitions
Balanced budgetBalanced budget: revenues = expenditures: revenues = expendituresBudget surplusBudget surplus: revenues > expenditures: revenues > expendituresBudget deficitBudget deficit: revenues < expenditures: revenues < expenditures
Budget surplus funds can either be spent as Budget surplus funds can either be spent as additional expenditures or used to pay off additional expenditures or used to pay off existing debtexisting debtFor now, assume surplus is used to pay off For now, assume surplus is used to pay off debtdebt
DefinitionsDefinitions
National deficitNational deficit: yearly budget deficit for : yearly budget deficit for federal governmentfederal government
National debtNational debt: cumulative amount of : cumulative amount of deficits or surplusesdeficits or surpluses
See national debt clock, See national debt clock, http://www.brillig.com/debt_clock/
Fiscal policyFiscal policy
Expansionary fiscal policyExpansionary fiscal policy: reduce taxes : reduce taxes and/or increase expenditures; goal is to and/or increase expenditures; goal is to expand or stimulate the economyexpand or stimulate the economy
Restrictive fiscal policyRestrictive fiscal policy: raise taxes and/or : raise taxes and/or decrease expenditures; goal is to slow decrease expenditures; goal is to slow economyeconomy
ScenariosScenarios
Expansionary policy will likely lead to Expansionary policy will likely lead to budget deficit (or shrink current surplus); budget deficit (or shrink current surplus); will result in larger national debtwill result in larger national debt
Restrictive policy will likely lead to budget Restrictive policy will likely lead to budget surplus (or shrink current deficit); will result surplus (or shrink current deficit); will result in smaller national debtin smaller national debt
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