1. GRAPHING FISCAL POLICY

2. Warm Up:  What is causing the nation to be in a recession?  What could cause the nation to experience a period of inflation ?

3. To Fight Recession…  Need to pursue ________ fiscal policy!!!  This mean, taxes ____ and government spending ____  So, is the government running a budget surplus or a budget deficit??? Explain.

4. Expansionary Fiscal Policy  Running a budget deficit…  Spending more money than they are collecting in taxes  Therefore, needs to get the extra money by taking out more loans!!!

5. Illustrating the Solution: Recessionary Gap Graph AS AD PL O/EY*Y ASLR I  Too _______ spending is causing Y ____ Y*

6. Fixing the Problem: ________________ FISCAL POLICY!!!  T___ DI___ C & I __ AE__ AD___ PL & O/E___  G___ AE__ AD___ PL & O/E___  Transfer Payments DI__ C & I__ AE__ AD___ PL/OE

7. Fixing the Problem: ELIMINATE THE RECESSIONARY GAP USING EXPANSIONARY FISCAL POLCIY!  C___  I____ AD____ PL & O/E___  G___

8. Fixing the Problem: Eliminate the Recessionary Gap Using Expansionary Fiscal Policy AS AD PL O/E O/E1O/E2 PL1 PL2 AD2

9. To Fight Inflation…  Needs to pursue _________ fiscal policy  This mean, taxes____ and government spending ______  The government will be running a budget ______.

10. Contractionary Fiscal Policy  Since they are collecting more tax revenue while government spending is decreasing, they will have left over money.

11. Illustrating the Problem: Inflationary Gap Graph AS AD PL O/EY*Y ASLR I Too ______ spending is causing Y ____ Y*

12. How to Fix the Problem: ________________ FISCAL POLICY!!!  T___ DI___ C & I __ AE__ AD___ Pl & O/E___  G___ AE__ AD___ PL & O/E___  Transfer Payments DI__ C & I__ AE__ AD___ PL/OE

13. Fixing the Problem: ELIMINATE THE INFLATIONARY GAP USING CONTRACTIONARY FISCAL POLCIY!  C___  I____ AD____ PL & O/E___  G___

14. Fixing the Problem: Eliminate the Inflationary Gap Using Contractionary Fiscal Policy AS AD PL O/E O/E2O/E1 PL1 PL2 AD2

15. POLICY INSTRUMENTS Systems set in place by the government to help achieve macro goals

16. POLICY INSTRUMENTS 1.) Fiscal Policy - govt using tax or spending to stabilize the economy the economy 2.) Monetary Policy - our national bank, the FEDERAL RESERVE, controls the Money Supply to stabilize the RESERVE, controls the Money Supply to stabilize the economy economy 3.) Foreign Economic Policies - trade policies that attempt to keep imports in line with exports attempt to keep imports in line with exports 4.) Income Policies - govt actions to moderate inflation by direct steps (ex: legislated wage and price controls) by direct steps (ex: legislated wage and price controls)

17. External Variables Things we have no control over…but they still affect the overall outcome of our economy 1. Weather 2. Foreign output 3. Revolutions or Wars

18. Video  “Unintended Consequences -- The Great Depression”  Take Notes!

19. Wrap-Up 1) What are some of the similarities between the problems leading up to the Great Depression and today? 2) What could have been done to avoid the Great Depression from being “Great?” 3) What is the multiplier effect? 4) What is “The Fed” (Federal Reserve) and what is it responsible for? 5) How does cash get it’s value?

20. Wrap Up: Fill In The Correct Answer 1. To correct an inflationary problem in the U.S., the AD curve needs to shift to the __________. 2. Using an expansionary fiscal policy results in taxes _________. 3. 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 ________________.