F3 Government spending affect the economy

Spending and Direct payments

1 Direct payments the government directly pays its employees. social security medicad Government programs provide income support to millions of citizens. 2 Government grants: the government sends funds to state and local governments. funds to rebuild roads state or local governments companies and universities recieve special grants to complete projects. research example

Types of Federal government spending Federal spending divided into three broad categories

1 Mandatory 2 Discretionary 3 Interest

Spending Challenges Spending can be inefficient for many reasons.

1 Personal motivation 2 special interest 3 Heavy social needs

Government spending 2010

1 defense homeland security 2 social security- intitlements 3 international assistance 4 social programs-intitlements medicad and medicare examples 5 labor and transportation 6 veterans' affairs 7 Treasury 8 Other

2009=2010

25 percent of GDP made of the us government spending

Debt and deficit Deficit spending requires a government to take on debt

Deficit spending requires a government to take on debt The government must pay interest on borrowed money The interest is factored into the budget 3 billion plus interest work in. Funds are borrowed from citizens or from other countries Key: can come from BONDS people loan money to government years later government will pay back with interest.

Effects of Expansionary Policy on the Economy Positive effects: provides more jobs can help businesses grow can help new industries develop can fund research and innovation

Effects of Expansionary Policy on the Economy Negative effects: can lead to debt can cause inflation and higher prices

Effects of expansionary spending lowers unemployment rate can trigger inflation create business growth

Effects of contractionary spending lowers gosvernment debt cause consumers to spend less improve inflation rates

Approaches to spending: Expansionary Policy

Expansionary spending occurs when the government chooses to run a larger deficit. The theory is that raising spending stimulates the economy. Revenue taxes do not match expenditures bring in 10 spend 30 mil you have a debt

Spending and Public needs example as a budget director

Government spend money to meet public needs, including: 1 public safety 2 education 3 health care 4 infrastructure- roads and bridges

Spending and economic indicators

Government spending can: INJECT capital into the market reduce unemployment increase production Example government spends money new road in state takes money hire a construction company will hire workers workers will be payed to help pay for roads that money goes into households because of jobs then those people working can spend money in firms mall shoes invest tv, money going into economy that money will increase production

Spending and the Economy

Governments spend money in targeted ways with the goal of: 1 reducing unemployment 2 improving economic stability 3 improving production 4 encouraging competition

Effects of Contractionary Policy on the Economy Positive effects: reduces debt can improve inflation and lower prices

Negative effects: can increase unemplyment can reduce consumer spending

In three to four sentences, summarize the overall message within President Obama's speech. Use what you have learned throughout the lesson to explain why it is important that citizens understand the government's budget.

President Obama is focusing on two main points in this speech: lowering the national debt and focusing spending, especially on education. Obama believes that investing in education for the future will help keep the US economy strong in the future. Citizens need to understand government spending because it affects their daily lives, from the taxes removed from their paychecks to the social needs of all citizens. Which details did you include in your answer? What Obama's fiscal goals are Where Obama would like to focus spending The reasons that citizens should understand the national budget

Fiscal policy Government spending ?

why the government spends how government spends spending affects economic indicators

Which statements accurately describe debts and deficits? Select all that apply. The deficit is the amount a government spends above what it brings in. The government's debt represents how much it owes from borrowing to pay for expenditures. Deficits cause debt to decrease. Deficits cause debt to increase. Debt is free and has few consequences for the government. Debt requires a government to pay back more than it has borrowed.

The deficit is the amount a government spends above what it brings in. The government's debt represents how much it owes from borrowing to pay for expenditures. Deficits cause debt to increase. Debt requires a government to pay back more than it has borrowed.

Categories of Federal Spending (2011) How does this graph show the importance of government spending to millions of Americans? State and local governments get the most money. The largest portion is spent on national defense. The largest portion is in the form of direct payments to workers and citizens. The government's payments all take the form of grants.

The largest portion is in the form of direct payments to workers and citizens.

balanaced budge matches expenditures with revenue

a balanced budget rarely happens revenue taxes tarrif balanced with expenditures how much you want to spend bring in 5 bill you need to spend 5 bill

Spending and Federal employees The federal government employs millions of Americans These jobs:

affect levels of employment affect spending 1960-2012 employees millions of Americans 4 million workers 2-3 percent total amount of workers in U.S. this affects level of employment and affects spending

Budgets Government budget is detail money isis spent on a year. A budget shows how the government plans to:

allocate money to programs and projects operate services and departments create funds to buy equipment and supplies

Meeting the spending targets in this Budget meant some very difficult choices. —President Barack Obama, 2012 Budget Message of the President What does it mean to make "difficult choices" when creating a federal budget? deciding how to keep interest rates on the national debt low deciding which country to borrow from to finance spending deciding how much to lend and how much to tax deciding what will be funded and what will be cut

deciding what will be funded and what will be cut

[C]utting programs that were not effective or essential and even some that were, but are now unaffordable; and precisely targeting our investments. Every department will feel the impact of these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth. —President Barack Obama, 2012 Budget Message of the President In this statement, which type of spending is President Obama referring to? mandatory discretionary interest tax

discretionary

When governments spend to improve the unemployment rate or increase GDP, they are focusing more on ________________.

economic needs

Government leaders try to take Action that will meet social needs and improve the economy

example great deal of money on education: create teachers money students will be better education better in society in work place

In President Obama's speech about the federal budget, which government policy is he speaking about? trade policy monetary policy regulatory policy fiscal policy

fiscal policy

Government spending and the CIRCULAR flow model

government sector can spend money that money can act as injectors in economy thru firms or housesholds.

Federal Public Debt

is in Trillions of dollars our government 1993-2012 steadily increases over 15 trillion

fiscal policy

is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

Goals of government spending

meeting public needs improving economic idicators

When I took office 3 years ago, my Administration was left an annual deficit of $1.3 trillion, or 9.2 percent of GDP, and a projected 10-year deficit of more than $8 trillion. . . . Together with the deficit reduction I signed into law this past year, this [new] Budget will cut the deficit by $4 trillion. —President Barack Obama, 2012 Budget Message of the President What is the purpose of the president's statement? to show how changes in fiscal policy can affect the economy to show the size of the deficit relative to GDP to show how large the national debt was when he took office to show how he plans to reduce the national debt

o show how changes in fiscal policy can affect the economy

BONDS

people loan money to government years later government will pay back with interest.

Pork barrel projects motivate for personal needs

projects motivate for personal needs

A surplus occurs when revenue is higher than spending

revenue higher than spending revenue bring in 8 billion from tax tarrifs trade only spend 5 billion have a 3 billion surplus

Federal Budget

running in a deficet revenues taken in less the U.S. government exp. that they are paying out.

When governments spend to improve education or health care, they are focusing more on ______________ .

social needs

3 Heavy social needs

social needs can be costly to resolve.

2 special interests

special interests can receive extra attention at the public's expense

A deficit occurs when spending is higher than revenue

spending is higher bring in 3 billion and spend 8 billion in expenditures

Approaches to spending: Contractionary Policy

spending occurs when the government chooses to reduce the deficit or gain a surplus The theory is that cutting spending improves government finances. Revenue you bring in 30 billion but you only spend 10 billion you have more revenue you have a surplus

Interest

spending on interest payments for the government's debt

Discretionary

spending that can be changed each year

Mandatory

spending that is required by law

What is the main goal of the creation of the federal budget? to allow the economy to run on its own to slow most economic progress to manage businesses and increase spending on all programs to decide how to manage the government's tax revenue and expenditures

to decide how to manage the government's tax revenue and expenditures

Together with the deficit reduction I signed into law this past year, this Budget will cut the deficit by $4 trillion over the next decade. This will put the country on a course to a level of deficits below 3 percent of GDP by the end of the decade, and will also allow us to stabilize the Federal debt relative to the size of the economy. —President Barack Obama, 2012 Budget Message of the President What does it mean to measure a government's deficit "relative to the size of the economy"? to compare the size of the deficit to productivity to compare the size of the deficit to the unemployment rate to measure the deficit as a percentage of the economy or GDP to measure the deficit as a percentage of tax revenues

to measure the deficit as a percentage of the economy or GDP

1 Personal motivation Pork barrel projects motivate for personal needs

voters and government leaders are motivated by personal needs

[H]ave the highest proportion of college graduates in the world by 2020. To reach that goal, we increased the maximum annual Pell Grant by . . . $900 to help nearly 10 million needy students afford a college education. . . . We are continuing our effort to prepare . . . 100,000 science and math teachers. . . . To prepare our workers for the jobs of tomorrow, we need to turn our unemployment system into a re-employment system. —President Barack Obama, 2012 Budget Message of the President Which aspects of economic growth is the president addressing in this passage? Select all that apply. ways to inject capital into the economy ways to improve fiscal policy ways to encourage increased productivity ways to decrease unemployment ways to create a balanced budget

ways to inject capital into the economy ways to encourage increased productivity ways to decrease unemployment