and the budget
Keep your vocabulary out…
Fiscal policy is an attempt by the government (President and Congress)
to stabilize and/or regulate the economy using the tools of the budget.
The tools of the budget are taxes and spending.
What is the policy?
Fiscal Policy
Why do we use it?
To regulate or stabilize the economy
Who controls it?
The President and Congress
How does it work?
Using the tools of the budget.
The tools of the budget are taxes and spending.
Fiscal Policy song:
To the tune of Frere Jacques: (Seriously)
Fiscal Policy (repeat)
Has two tools (repeat)
Taxes and spending (repeat)
Is what they use (repeat)
Keynes (John Maynard Keynes, a British Economist)
believed the government could use fiscal policy
(its budgetary plan) to fix the economy
(by controlling spending).
Keynes believed if you (the government )could control
demand; you could control the economy.
because your spending impacts the economy.
Keynesian economics is also known as
“demand-side” economics.
The government must take control the economy
during periods of inflation and periods of recession
in order to fix or stabilize the economy.
So, how does it control the economy or
attempt to control the economy?
INFLATION
TOO MUCH
SPENDING
TOO MUCH
DEMANDING
TOO MUCH PURCASHING
MORE AND MORE GOODS
So, keeping in mind that the government can raise or lower taxes;
what should the government do to the amount
of money it collects from you in taxes?
RAISE OR LOWER THEM?
RAISE!
And what should it do to its own spending?
CUT SPENDING! (LOWER SPENDING.)
RECESSION
Recession means too little money in the economy.
Therefore, recession means too little spending
or demanding (demand-side economics).
Keynes would say it means
too little demand.
There is too little air in the balloon.
So, this time we have to fill it up!
The question is how!
RECESSION
During a recession, when people are not spending; not demanding.
how much should the government collect increase or decrease taxes?
TAXES SHOULD BE LOWERED/DECREASED
What should the government do to its own spending? Increase/decrease?
GOVERNMENT SPENDING SHOULD BE INCREASED.
What did the government (Congress and President Bush) do one spring;
in hopes of boosting the economy, boosting spending?
ISSUED REBATES.
A bonus…extra money back.




INFLATION ~~~
DECREASE
DEMAND
INCREASE TAXES
DECREASE
SPENDING






*POLITICAL
SUICIDE
RECESSION~~~
INCREASE
DEMAND
DECREASE TAXES
INCREASE
SPENDING
ISSUE REBATES
$
Too much money = inflation
Too little money = recession!!!