Unit 8 - Federal Budget Policies

1
Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• is the yearly difference between federal
  government expenditures and revenues.

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• Example 1
• If government spending in year 1 is 2,500, and
  government revenue is 2,000, then the deficit in
  year 1 is 500.

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• Example 2If government spending in year 2 is
  2,400, and government revenue is 2,600, then
  the surplus in year 2 is 200.

Macroeconomics
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Lets play Jeopardy!

• Federal
• Deficits
• for 200

Macroeconomics
5
Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• Answer
• This, approximately, was the U.S. federal budget
  deficit for the past fiscal year.What is the
  question?

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• Question
• What is 1,300 billion?
• Source http//www.federalreserve.gov/boarddocs/t
  estimony/2007/20070118/default.htm

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Federal Budget Deficit or Surplus
• Additional websites with budget information
• http//www.cia.gov/
• http//www.whitehouse.gov/omb/budget

Macroeconomics
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Unit 8 - Federal Budget Policies

• The National Debt
• is the accumulation of all yearly deficits minus
  the yearly surpluses.

Macroeconomics
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Unit 8 - Federal Budget Policies

• The National Debt
• Example 1
• If the deficit in year 1 is 250 billion, and
  the deficit in year 2 is 300, and the deficit in
  year 3 is 200, then, assuming no other deficits
  or surpluses, the total national debt is 750.

Macroeconomics
10
Unit 8 - Federal Budget Policies

• The National Debt
• Example 2
• If the deficit in year 1 is 350 billion, and
  the deficit in year 2 is 200, and the surplus in
  year 3 is 100, then, assuming no other deficits
  or surpluses, the total national debt is ___
  (fill in the blank).

Macroeconomics
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Jeopardy!

• The National Debt for 300

Macroeconomics
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Unit 8 - Federal Budget Policies

• The National Debt
• Answer
• Approximately, (within a trillion dollars) this
  is the current federal debt.
• What is the question?

Macroeconomics
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Unit 8 - Federal Budget Policies

• The National Debt
• The question
• What is 15 trillion?Click on the following
  national debt clock link for updates by the
  second.
• http//www.brillig.com/debt_clock/

Macroeconomics
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Unit 8 - Federal Budget Policies

• Financing the Deficit
• The government (in the United States, it is the
  U.S. Treasury) finances its deficits by
• 1. issuing bonds to the public (very common).
• 2. selling assets, such as land and buildings
  (not very common).

Macroeconomics
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Unit 8 - Federal Budget Policies

• Budget Philosophies
• Three common budget philosophies are
• 1. The annually balanced budget
• 2. The cyclically balanced budget
• 3. Functional finance

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Annually Balanced Budget
• Expenditures must equal revenue within one
  fiscal year.
• Classical economists prefer this philosophy.
• It is currently state and county law.

Macroeconomics
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Unit 8 - Federal Budget Policies

• The Cyclically Balanced Budget
• Deficits during recessions must equal
  surpluses during expansions.
• Keynes recommended this policy.

Macroeconomics
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Unit 8 - Federal Budget Policies

• Functional Finance
• Deficits and national debts are okay. The main
  objective of the government is to achieve full
  employment.
• This philosophy has been implemented by most
  industrial
• countries governments
• since WWII.

Macroeconomics