1. Warm Up: True or False (If FALSE, make it into a true statement by changing the word(s) in yellow)
To correct an inflationary problem in the U.S., the AD curve needs to shift to the __________.
Using an expansionary fiscal policy results in interest rates _________.
Supporters of fiscal policy believe that inflation can be reduced by __________
________________.
4. Keynes believed that spending money was the key to controlling the economy during a _____________.
5. Full employment implies that unemployment is ________________.

2. Warm-Up What are the 3 macro goals of the U.S. economy?
2) What problems may result from too much inflation?
3) What problems may result from a recession

3. Two Major Problems That Can Occur in Our Economy [extremes of the __________________):
__________/__________:
- Low GDP/high unemployment
__________:
Prices increasing too quickly
HOW DO YOU FIX THEM???

4. ____________

5. Definition:
Fiscal Policy can be defined as what the government does with _________ or __________ ___________ to stabilize the economy during periods of recession or inflation.
What the ____ __________ does to try and ___________ ____
___________.

6. What are the 2 tools of fiscal Policy?
________________
2) ________________

7. Three Possible Results of Fiscal Policy:
_______ ________: government spending _________ than tax revenue
_______ _________: government spending is ______ than tax revenue
_________ _______: government spending __________ to tax revenue

8. Create a Tree Map

9. How Fiscal Policy Started…
Before the Great Depression, the U.S. adopted a policy of _________-______. (___ _____________ _____________)
But with the economy in such an economic crisis during the ________, citizens cried out for the gov’t to take ________ and play a more _______ role in the ___________

10. ________________________
Why do you think citizens wanted the government to become more “ACTIVE”?
________________________

11. John Maynard Keynes
He was __________ economic guru during the ________ ___________.
He advised the president that the only way to bring the economy out of a __________ was for the __________ to play a more ______ role in the economy (______ ________).
Therefore, Keynes is noted for being the ________ ___ _________ _________.
Fiscal Policy greatly __________ the role of the government in the ________ _______.

12. ________________________
In what way is Keynes’ advice to FDR different from the policy of laissez-faire? ________________________
________________________

13. Problem: ___________/___________
SOLUTION:
The government pursues an _____________ fiscal policy:
___________ government spending
___________ taxes
The intention is to _________ GDP and _________ unemployment
=___________________

14. ________________________
How does increasing government spending and/or lowering taxes help fight the problem of a recession???
________________________

15. Problem: ___________/___________
SOLUTION:
The government pursues an _____________ fiscal policy:
___________ government spending
___________ taxes
The intention is to _________ GDP and _________ unemployment
=___________________

16. ________________________
How does decreasing government spending and/or increasing taxes help to fight the problem of inflation???
________________________

17. Wrap-Up What are the 2 extremes of the business cycle?
2. What type of fiscal policy should be pursued to fight a recession?
3. What type of fiscal policy should be pursued to fight inflation?
4. Who’s the founder of Fiscal Policy?
5. What does laissez-faire mean?