2.  I can Describe how the Federal Government borrows money

3.  Article I, Section 8, Clause 2  Congress shall have the power to borrow money on the credit of the United States  Reasons for Borrowing  Meet the costs of crisis situations  Usually wars  Pay for large-scale projects that could not be financed out of current income  Building of the Panama Canal  To finance budget deficits  Shortfall between income and expenses

4.  Must be authorized by Congress  Actual borrowing is done by U.S. Dept of Treasury  Issues:  Treasury Notes or Bills – AKA T-Bills (Short Term)  Treasury Bonds – AKA T-Bonds (Long Term)  Purchased by banks, investment companies, wealthy individuals  Popular Investment because:  No safer investment than the U.S. Government  Not taxed by State or Local Government

5.  Unemployment  1929 – 2 million  1933 – 13.5 million (1 of every 5 workers)  1935 – 18 million dependent on federal aid  1929-1932 – 1 in every 5 banks closed  1932 – net farm income 33% of 1929

6.  I can Explain how the Federal Government’s actions can affect the economy

7.  FDR – the New Deal  Government spends because NOBODY else has money to spend  John Maynard Keynes – British Economist  Government borrows to increase spending  Soon results in higher employment = Higher Tax Revenues  AKA Demand-Side Economics

8.  Supply Side Economics  Follows Theory of John Meynard Keynes  Ronald Reagon  Government should lower taxes  Causes Increased Income – Increasing Spending – Increasing Production – More Employment

9.  I can analyze the causes and effects of the public debt

10.  Includes:  All money Government has borrowed and not yet repaid  All interest owed on that debt  Currently:  U.S. National Debt Clock : Real Time U.S. National Debt Clock : Real Time  Is no Constitutional Limit on amount permitted  1789-1981 – Climbed to $1,000,000,000,000  Causes:  Government surplus (since 1789) only 19 times  Effects:  Annual interest (2008) was $253,000,000,000  Future Taxpayer’s will have to eventually repay