1. Fiscal
Policy
Options

2. Government use of taxing and spending to stabilize the economy
Fiscal Policy
Government use of taxing and spending to stabilize the economy

3. Classical Economics
The idea that free markets can regulate themselves, without govt. intervention (laissez faire)

4. Demand-Side Economics
The idea that government spending and tax cuts can help an economy by raising demand

5. The idea that govt. spending can help an economy by raising demand
Keynesian Economics
The idea that govt. spending can help an economy by raising demand

6. Multiplier Effect
The idea that every one dollar of spending creates more than one dollar in economic activity

7. Supply-side Economics
The idea that tax cuts (particularly for the wealthy) can help an economy by increasing supply

8. Expansionary Policy
Fiscal policies that attempt to increase economic output, such as higher spending or tax cuts

9. Contractionary Policies
Fiscal policies that attempt to decrease economic output, such as lower spending or higher taxes

10. Fiscal Policy in American History
World War II – Keynesian economics. Government spending for the war effort helped the economy.

11. Fiscal Policy in American History
Kennedy Administration– tax cuts helped to stimulate the economy.

12. Fiscal Policy in American History
1980’s (Reagan Administration)– reduced taxes dramatically over 3 years. Caused a recession at 1st then economy flourished.

13. The End