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Fiscal Policy Debate

Fiscal Policy Debate. By Tracy, Mindy, and Zach. When you think of money, you think of pimps!. The Role of Government. President Bush and Congress (the senate and the House of Representative). I’m da boss now dawg!. Alright Prez. The Role of Government. -They run our country.

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Fiscal Policy Debate

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  1. Fiscal Policy Debate By Tracy, Mindy, and Zach When you think of money, you think of pimps!

  2. The Role of Government • President Bush and Congress (the senate and the House of Representative) I’m da boss now dawg! Alright Prez.

  3. The Role of Government -They run our country. -They decide what taxes we pay, how much they are, and when to tax us.-They also decide if we go war.

  4. Real World Example of Fiscal Policies If all things are held constant recessionary gap the government spending would raise the dollar value. The Inflationary gap if the reduce spending they will lower the dollar value. A rise in taxes cause a reduction in aggregated demand because it reduces consumption, investment, or net exports. Automatic stabilizers are the tax system itself and the government transfer system. It includes unemployment compensation and welfare spending. Fiscal Policy at Abnormal Times When a catastrophic drop in real GDP as in Great Depression fiscal policy may be able to stimulate aggregate demand. Government spending is a good way to get money into peoples hands that need it. War is a good way to et the real GDP to increase dramatically as in WWII.

  5. Taxation • The US has a progressive federal individual income tax system. • Expansionary Fiscal policy might involve reducing marginal tax rates. • The government by applying lower marginal tax rates will not necessarily lose tax revenues for the lower marginal tax rates will be applied to a lower marginal tax rates because of a lower economic growth. After all tax revenues are the product of a tax rate times a tax base. • Income and profits fall when business activities come down. Government take taxes too. It reduces the extent of any economic fluctuation. Jay and Silent Bob are demonstrating how fun taxation and the government can be.

  6. An Actual Scenario using Monetary Policy • If inflation is 7% and unemployment is 7% and the last quarter for GDP was 1%our fiscal policy will be to lower taxes and send everyone a tax rebate check to stimulate the economy. This guy is happy because he has a job cutting lawns and he will get a tax rebate check.

  7. Relationship changes in Aggregate Demand and Aggregate Supply Pichu likes graphs!

  8. Causes and Consequences of Change in AS and AD. Causes AS: People would be buying from businesses. Consequences AS: They’d be able to hire more people. Causes AD: We are cutting taxes. Consequences AD: People will have money to spend and stimulate the economy. This car salesman will be happy because people will buy cars.

  9. Standard Indicators of Economic Fluctuations • Peaks, • Troughs, • Expansions, • Contractions… Look at it, it has troughs in it! It's perfect! - Tracy

  10. Sources: http://www.lib.uwaterloo.ca/discipline/econom/morelinks.html www.google.com http://usinfo.state.gov/products/pubs/oecon/chap7.htm

  11. Monetary Policy Debate By Tracy, Mindy, and Zach When you think of money, you think of pimps!

  12. The Role of Government • The president elects the chairman of the Federal Reserve Board. Dude you da chairman! Alright dawg.

  13. The Role of Government The Board:Ben S. Bernanke, Chairman | Roger W. Ferguson, Jr., Vice Chairman | Susan Schmidt Bies | Mark W. Olson | Donald L. Kohn | Kevin M. Warsh | Randall S. Kroszner The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office. The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.

  14. Real World Example of Monetary Policies One of the most important changes was the creation of the Federal Open Market Committee (FOMC) to direct open market policy. At the end of 1933Roosevelt had shifted his attention to monetary matters: recovery was to be promoted by raising the prices of commodities in dollars, and the prices of commodities in dollars were to be raised by devaluing the dollar in terms of gold. If the monetary authority in the United States, the Federal Reserve,wants to stimulate increased production, they would do it by increasing bank reserves. There is not a lot of pimping durring the great depression.

  15. The Role of the Federal Reserve in Implementing Monetary Policy • Theymake the money. • The Federal Reserve Notes are printed at the Bureau of Printing and Engraving in Washington • The Fed provides a system for check collection and clearing. I wish the fed was this excited about their jobs.

  16. The Roles of the Federal Reserve Board • The Federal Reserve Boardwould use their tools (the reserve requirements, open market operations, and discount rates) to do what ever was needed in the situation according to the scenarios below. • If you’re in a recessionyou’d use the money supply to help get out of the recession. • If you have inflationthey’d decrease the money supply.

  17. Correcting Economic Fluctuations Using Conventional Monetary Policy: • The Federal Open Market Committee announces changes in it’s policy stance and begins to explicitly state it’s target level for the federal funds rate. The statement Committee’s assessment of the risks to the attainment of its long-run goals of price stability and sustainable economic growth. • The Discount Rate charged for primary credit is set above the usual level of short-term market interest rates. It changes with inflation, deflation, and with the average price increase or decrease because it’s not just one thing it’s the average of all things. • The Reserve Requirements the amount of money held by the fed in banks. But if you’re in a peak or trough, they’ll do what’s needed.

  18. An Actual Scenario using Monetary Policy • If inflation is 7% and unemployment is 7% and the last quarter for GDP was 1%our monetary policy is that we will reduce the money supply by asking the banks to hold 15% of deposits. If this doesn’t work we’d sell federal bonds.

  19. Relationship changes in Aggregate Demand and Aggregate Supply Pichu likes graphs!

  20. Causes and Consequences of Change in AS and AD. • Supply: Lesser unemployment because people would be spending more, so people can make more goods which would raise the employment and real GDP. • The aggregate demand would increase: • because they’d be spending more, • because they’d have more money, • and because they’d be working.

  21. Standard Indicators of Economic Fluctuations Flux Capacitor • Peaks, • Troughs, • Expansions, • Contractions… Look at it, it has troughs in it! It's perfect! - Tracy

  22. Sources: http://www.lib.uwaterloo.ca/discipline/econom/morelinks.html www.google.com

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