Business Cycles What are the little ups and

Business Cycles

What are the little ups and downs along the GPD graph? Business Cycles Business cycles are the recurrent swings (up and down) in real GDP Business cycle video clip

Ready for your business cycle quiz? The economy is functioning at its maximum in which phase of the business cycle? a) Recovery b) Peak c) Recession d) Trough

Ready for your business cycle quiz? What is the term to describe fluctuations that occur in economies? a) Aggregate demand b) Aggregate supply c) Business cycles d) Government regulations

Ready for your business cycle quiz? In which phase of the business cycle are output and employment at their lowest levels? a) Recovery b) Peak c) Recession d) Trough

Ready for your business cycle quiz? What is the phase of the business cycle where output and employment levels begin to rise a) Recovery b) Peak c) Recession d) Trough

Ready for your business cycle quiz? Why have business cycles not been as severe since the Great Depression? a) Businesses have invested more b) Government safeguards and balances have been implemented c) Consumer confidence has been greater d) Government spending has increased

Would it be bad to spend money like the federal government?

Deficits + Surplus’ = $21, 000, 000+ in National Debt Macroeconomics Unit Chapter 14

GOVERNMENT DEBT AND DEFICITS BUDGET when DEFICIT: expenditures exceed revenue Expenditure: Revenue: an amount of money spent income

BUDGET SURPLUS: when revenue exceeds expenditures

Whose Fault is the Debt? Congress and the President!!! If the economy slows down, there is less tax revenue It takes time to adjust Federal spending If war breaks out, spending increases Should congress have a balanced budget?

What if There are Unforeseen Costs?

GOVERNMENT DEBTS AND DEFICITS National Debt: the sum of all past deficits and surpluses Currently: Over $21, 078, 301, 250, 985. 42! approx. or $64, 598 per citizen $160, 000 per taxpayer

Fiscal Policy Fiscal policy is changes government makes in spending or taxation to achieve particular economic goals.

Fiscal Policy President and Congress Responsible for influencing the economy through policies of spending taxing and

What is Macroeconomics? Yale Prof explains

Fiscal Policy And Invisible Hand Adam Smith believed individuals maximizing their own good through trade and entrepreneurship benefits society as a whole government intervention in the economy isn't needed the invisible hand is the best guide for the economy

Fiscal Policy History Things chugged along nicely until 1929 and the Great Depression when the business cycle didn’t recover as fast as we’d hoped

Fiscal Policy History During the Great Depression, British economist John Maynard Keynes said, “In the long run we are all dead. ” The government should use their power to tax and spend to stimulate the economy and lessen suffering.

Fiscal Policy History Continued The goal of Keynesian Theory during a depression? curb inflation (keep it between 2 -3%) increase employment maintain a healthy value of money. When inflation is too strong, the economy may need a slowdown

Keynesian Economic Theory States that governments can influence macroeconomic productivity levels by increasing government spending and decreasing taxes when times are bad OR Decreasing government spending and Increasing taxes when times are good.

The Great Recession

Fiscal Policy GDP = C + I + G + Xn Fiscal policy is the government’s use of G and T to affect aggregate demand in order to stabilize the economy

Economic Stimulus Act of 2008 Intended to boost the United States economy and to avert a recession Signed into law on February 13, 2008 by President Bush with the support of both Democratic and Republican lawmakers. Provides for tax rebates to low- and middle-income U. S. taxpayers, tax incentives to stimulate business investment, and an increase in the limits imposed on mortgages eligible for purchase by governmentsponsored enterprises Total cost of this bill was projected at $152 billion

American Recovery and Reinvestment Act of 2009 In response to the Great Recession, it’s the primary objective was to save and create jobs Its secondary objectives were to provide temporary relief programs for those most impacted by the recession and invest in infrastructure, education, health, and renewable energy. Approximate cost of the economic stimulus package was estimated to be $800 billion It included direct spending in infrastructure, education, health, and energy, federal tax incentives, and expansion of unemployment benefits

Definitions 'Expansionary Fiscal Policy' An increase in government spending Or A reduction in taxes

Increasing Government Spending Causes Inflation and Raises Interest Rates

Definitions 'Contractionary Fiscal Policy’ A decrease in government spending Or An increase in taxes

Fiscal Policy Problem/Solution When the US has high unemployment rate what can Congress do to lower it?

Fiscal Policy Problem/Solution Unemployment is extremely high What can Congress do? Expansionary Fiscal Policy: Congress could increase government spending Lower taxes

Fiscal Policy Problem/Solution Venezuela has high inflation rates What can their government do to fix it?

Fiscal Policy Problem/Solution Venezuela has high inflation rates What can their government do? Contractionary Fiscal Policy: Decrease government spending Raise taxes on businesses and individuals

Investopedia 2 views on fiscal policy video clip