Economics Lessons 22-24
Lesson #22: Fiscal Policy
Warm-Up: An extension of our last warm up. What effect does government spending have on the
economy? Think that through a bit. What effect does government deficit spending have on the
economy? In both questions think of short run and long run. Think of the four goals of Macro policy:
trade deficits, employment, inflation, & growth.
Where does the federal government derive its tax income from? Make a guess and sketch it out.
Lecture: Tim Taylor – Fiscal Policy & Budget Deficits
Questions to consider, discuss, and record in your notebook:
1. In the current state of the economy, which one or two of the four goals of macro policy do you
feel is most important? How can fiscal policy help achieve that goal?
2. It’s always easy to think of tax cuts and spending increases to support But what are some tax
increases and spending cuts you might be willing to support?
Review Text: Chapter 15.1
Vocabulary to know and record:
Potential output –multiplier effect
Lesson 23: Countercyclical Fiscal Policy/Keynesian Economics
Warm-Up: Can our government deficit spend in recessions and run surpluses in growth periods? What
would Plato say and what has been your experience (I mean the fiscal history of the State of Oregon and
the Fed Gov. during your lifetime)?
Lecture: Tim Taylor – Countercyclical fiscal Policy
Questions to consider, discuss, and record:
1. The federal government appears likely to have budgets that are balanced for the next few years.
Consider proposals to balance the federal budget every single year, regardless of economic
conditions. Describe the strengths and weaknesses of such a policy. Ultimately, do you think it’s
a good idea? (see “In the News” p.460 before writing your response)
2. Describe the theoretical case for countercyclical fiscal policy and some of the practical
difficulties in implementing such a policy.
Text to Review: Chapter 15.2 & 15.3
Terms to know and record:
Discretionary Fiscal policy-Lag-Crowding Out-Crowding In
Lesson #24: Money & Banking & the Federal Reserve
Warm-Up: Recall from previous Taylor lesson: What is money (16.1 & 16.3)? What is a bank and what do
banks do(16.2)? How do banks create money(17.1)?. This is hard so review your text.
Lecture: Tim Taylor – The Federal Reserve and its Powers
Questions to consider, discuss, and record:
1. Under what circumstances should the Fed implement expansionary monetary policies?
Contractionary Policies?
2. Beyond Monetary Policy, what are the responsibilities of a central bank?
Text to Review: 16.2(492-494), 17.2, & 17.3
Terms to know and record:
The Fed-discount rate-Federal Open Market Committee-Money Supply-federal funds market/rate