Fiscal Policy Lecture Slides

Unit 4

Fiscal Policy

Economics

Multiple Choice

Who do you think was the last president to get the republicans and democrats in Congress to come together and agree on a balanced budget for the Federal Government (meaning only spending what the government makes in tax revenue)?

• President Trump

• President Obama

• President Bush Jr.

• President Clinton

The Federal Budget

Multiple Select

What is included in Mandatory spending in the Federal Budget. Select all that apply.

• Social Security, Government Salaries, Interest on Debt

• Social Security, Military, Education

• Medicare (Health insurance for elderly), Military, Government Salaries

• Social Security, Medicare (Health insurance for elderly), Medicaid (Health Insurance for the poor)

Multiple Choice

Fiscal policy is controlled by...

• The Federal Reserve

• The Federal Government

Multiple Choice

During an Expansionary phase of the business cycle, we would expect the unemployment rate to be...

• Inverse to GDP, so declining

• Following GDP, so rising

• nothing, there is no relationship to GDP and the unemployment rate

Economics Goals & Business Cycle

Remember the Government’s economics goals
are:
1.Growth

2.

Full Employment

3.

Price Stability

When our economic is operating at full
employment, the government's goals is to
generally have a balancebudget→ Spending
only what it takes in through taxes (income)

We want our economy to follow the trend line

Multiple Choice

This economic model is called:

• The business cycle

• Supply & demand

• Production Possibilities Curve

• Circular Flow Model

Multiple Choice

Points 1 and 4 represent

• Peaks and expansion

• Troughs and recession

• Peaks and depression

• Contraction and expansion

Dropdown

Usually during a recession GDP is​

Select answer

, unemployment is ​

Select answer

, and inflation tends to be ​

Select answer

Multiple Choice

What does the government end up with a budget deficit when using Expansionary fiscal policy?

• The government is usually taking in less tax revenue, but at the same time spending less.

• The government is usually taking in more tax revenue, but at the same time spending less.

• The government is usually taking in less tax revenue, but at the same time spending more.

• The government is usually taking in more tax revenue, but at the same time spending more.

What happens when you have year after year of budget deficiets?

National Debt

Use the website on the following page to answer the following questions about the National Debt.

Understanding the National Debt | U.S. Treasury Fiscal Data

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Multiple Choice

What is the current approximate amount of the U.S. National Debt?

• $13 Trillion

• $33 Billion

• $38 Trillion

• $0

Multiple Choice

What is the national debt?

• The total amount of money borrowed by state governments.

• The total amount of money borrowed by U.S. citizens.

• The total amount of money the U.S. government has borrowed over its history.

• The total amount of money borrowed by private corporations.

Multiple Choice

What is the significance of the debt to GDP ratio?

• It measures the interest rate on the national debt.

• It reflects the total amount of debt held by foreign investors.

• It shows the burden of debt relative to the country's economic output.

• It indicates the total amount of debt held by the public.

Multiple Choice

Which of the following is a major cause of increased national debt during the COVID-19 pandemic?

• Increased government spending and decreased tax revenue.

• Increased exports and decreased imports.

• Decreased government spending and increased tax revenue.

• Decreased unemployment rates.

Multiple Choice

Why can't the government just print more money to pay off the national debt?

• It would increase the national debt.

• It is illegal under the U.S. Constitution.

• It would lead to inflation and devalue the currency.

• It would decrease the national debt.

Dropdown

A period of high inflation is usually characterized by ​

Select answer

GDP, ​

Select answer

unemployment, and ​

Select answer

prices

Multiple Choice

Contractionary fiscal policy goal is to...

• Reduce Unemployment

• Reduce Inflation

• Reduce Taxes

• Increase Government Spending

Match

Match the terms regarding fiscal policy

• Expansionary Policy

• Contractionary Policy

• Spending More than tax revenue

• Spending less than tax revenue

• Fiscal Policy Tools

Business Cycle Contraction (recession)

Business Cycle Expansion

Budget Deficit

Budget Surplus

Taxes & Spending

• Business Cycle Contraction (recession)

• Business Cycle Expansion

• Budget Deficit

• Budget Surplus

• Taxes & Spending

Multiple Choice

Why is Stagflation so bad?

• Inflation and Unemployment are both low while GDP is high

• Inflation is high, unemployment low, and GDP high

• Inflation and unemployment are both high, while GDP is low

Multiple Choice

Which of the following best describes the difference between expansionary and contractionary fiscal policy?

• Expansionary increases government spending and/or decreases taxes, while contractionary decreases government spending and/or increases taxes.

• Expansionary decreases government spending and increases taxes, while contractionary increases government spending and decreases taxes.

• Both policies increase government spending and decrease taxes.

• Both policies decrease government spending and increase taxes.

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