1. Unit 8 - Federal Budget Policies n The Federal Budget Deficit or Surplus is the yearly difference between federal government expenditures and revenues. Macroeconomics

2. Unit 8 - Federal Budget Policies The Federal Budget Deficit or Surplus The Federal Budget Deficit or Surplus Example 1 If government spending in year 1 is $2,500, and government revenue is $2,000, then the deficit in year 1 is $500. Macroeconomics

3. Unit 8 - Federal Budget Policies The Federal Budget Deficit or Surplus The Federal Budget Deficit or Surplus Example 2 If government spending in year 2 is $2,400, and government revenue is $2,600, then the surplus in year 2 is $200. Macroeconomics

4. Let’s play Jeopardy! FederalDeficits for $200 Macroeconomics

5. Unit 8 - Federal Budget Policies n The Federal Budget Deficit or Surplus Answer: This, approximately, was the U.S. federal budget deficit for the past fiscal year. What is the question? Macroeconomics

6. Unit 8 - Federal Budget Policies n The Federal Budget Deficit or Surplus Question: What is $1,300 billion? Source: http://www.federalreserve.gov/boarddocs/testimony/2007/20070118/default.htm Macroeconomics

7. Unit 8 - Federal Budget Policies n The Federal Budget Deficit or Surplus Additional websites with budget information:  http://www.cia.gov/  http://www.whitehouse.gov/omb/budget Macroeconomics

8. Unit 8 - Federal Budget Policies n The National Debt is the accumulation of all yearly deficits minus the yearly surpluses. Macroeconomics

9. Unit 8 - Federal Budget Policies n The National Debt Example 1 If the deficit in year 1 is $250 billion, and the deficit in year 2 is $300, and the deficit in year 3 is $200, then, assuming no other deficits or surpluses, the total national debt is $750. Macroeconomics

10. Unit 8 - Federal Budget Policies n The National Debt Example 2 If the deficit in year 1 is $350 billion, and the deficit in year 2 is $200, and the surplus in year 3 is $100, then, assuming no other deficits or surpluses, the total national debt is $___ (fill in the blank). Macroeconomics

11. Jeopardy! The National Debt for $300 Macroeconomics

12. Unit 8 - Federal Budget Policies n The National Debt Answer: Approximately, (within a trillion dollars) this is the current federal debt. What is the question? Macroeconomics

13. Unit 8 - Federal Budget Policies n The National Debt The question: What is $15 trillion? Click on the following national debt clock link for updates by the second. http://www.brillig.com/debt_clock/ Macroeconomics

14. Unit 8 - Federal Budget Policies n Financing the Deficit The government (in the United States, it is the U.S. Treasury) finances its deficits by: 1. issuing bonds to the public (very common). 2. selling assets, such as land and buildings (not very common). Macroeconomics

15. Unit 8 - Federal Budget Policies n Budget Philosophies Three common budget philosophies are: 1. The annually balanced budget 2. The cyclically balanced budget 3. Functional finance Macroeconomics

16. Unit 8 - Federal Budget Policies n The Annually Balanced Budget Expenditures must equal revenue within one fiscal year. Classical economists prefer this philosophy. It is currently state and county law. Macroeconomics

17. Unit 8 - Federal Budget Policies n The Cyclically Balanced Budget Deficits during recessions must equal surpluses during expansions. Keynes recommended this policy. Macroeconomics

18. Unit 8 - Federal Budget Policies n Functional Finance Deficits and national debts are okay. The main objective of the government is to achieve full employment. This philosophy has been implemented by most industrial countries’ governments since WWII. Macroeconomics