1. Long-Run Implications of Fiscal Policy and Monetary Policy : Deficits and the Public Debt
Lesson 33
Sections 30, 31

2. Budget Balance Budget Balance as a Measure of Fiscal Policy
Government Purchases
Transfers
Taxes
Business Cycle
Should the Budget be Balanced?

3. Long Run Implications of Fiscal Policy
Deficit, Surplus, and Debt
Fiscal Year
Oct1 to Sep30
Public Debt
18,010,010,000, Dec 14
Problems Posed by Rising Government Debt
Crowding Out
Cost of Financing the Debt
Deficits and Debt in Practice
Debt to GDP Ratio

4. Implicit Liabilities
Implicit Liabilities are spending promises on future budgets
Medicare
Social Security
Medicaid

6. Monetary Policy and the Interest Rate
Fed uses changes in money supply to change interest rates
Fed board meets every 6 weeks to determine policy
Set the Fed Funds Rate (desired level of interest rates)
Purchase or Sell Treasury Bills until rates match policy

7. Monetary Policy and Aggregate Demand
Expansionary Policy
When output is lagging (below potential)
Contractionary Policy
When inflation is rising
Inflation Targeting
Rather than using rates to set inflation, some banks target an inflation rate to set the inflation rate they want