Standard 2
Understand the fundamental concepts
relevant to the institutions, structure,
and functions of a national economy
SS.912.E.2.9
Analyze how changes in federal
spending and taxation affect budget
deficits and surpluses and the
national debt
Definitions
Balanced budget: revenues = expenditures
Budget surplus: revenues > expenditures
Budget deficit: revenues < expenditures
Budget surplus funds can either be spent as
additional expenditures or used to pay off
existing debt
For now, assume surplus is used to pay off
debt
Definitions
National deficit: yearly budget deficit for
federal government
National debt: cumulative amount of
deficits or surpluses
See national debt clock,
http://www.brillig.com/debt_clock/
Fiscal policy
Expansionary fiscal policy: reduce taxes
and/or increase expenditures; goal is to
expand or stimulate the economy
Restrictive fiscal policy: raise taxes and/or
decrease expenditures; goal is to slow
economy
Scenarios
Expansionary policy will likely lead to
budget deficit (or shrink current surplus);
will result in larger national debt
Restrictive policy will likely lead to budget
surplus (or shrink current deficit); will result
in smaller national debt
Focus: Understanding Economics in Civics and
Government
Lesson 5 Government Spending
Video: HOAE Chap 26 video
The Great Economics Mysteries Book
Chapter 4 Lesson 6 How We Almost Got a Sixth Great
Lake
Focus: Understanding Economics in Civics and
Government
Lesson 12 Federalism
Video: Stossel 2011 Are we heading
toward a debt crisis?
Video: Tim Hawkins the government can
Video: Learn Liberty how big is the US
debt
Those are big numbers
Video: How much is a billion dollars-Dave
Walker
The debate about how much government
should be involved in economic affairs has
been ongoing for centuries
Two fun ways to summarize:
Fear the boom and bust-Keynes vs Hayek
Fight of the century-Keynes vs Hayek
round 2