04.05 Uncle Sam\'s Toolbox PDF

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Define fiscal policy. Include the goals and tools of fiscal policy and the entity that controls it. Fiscal policy: It’s the government earning and spending money. The tools that the government uses are taxing and spending. he main goals of fiscal policy are to achieve and maintain full employment, reach a high rate of economic growth, and to keep prices and wages stable.

Compare and contrast fiscal and monetary policy. How are they alike and how do they differ? Monetary policy addresses interest rates and the supply of money in circulation, and it is managed by the Federal Reserve. Fiscal policy addresses taxation and government spending, and it is determined by the U.S. Congress.

Should the government create a law mandating a balanced federal budget? Support your position with evidence from the lesson. Federal budget is a plan of income and expenses each year. So yes, I think the government should create a law mandating a balanced federal budget because it would prevent the government of overspend.

Scenario 1 The government is currently spending three billion, one hundred million on programs and brings in three billion, five hundred million through taxation. 4. Does this create a budget surplus or deficit? Explain. - This creates a budget surplus because although the government is spending money, it is bringing in more money through taxation than it is spending. 5. As a member of Congress, what changes would you suggest to fiscal policy to balance the budget? Explain at least two ways you would use the tools of fiscal policy to balance the budget by recommending an "increase" or "decrease" to each tool in your explanation. - As a congressman, I would make a decrease on taxes. 6. What are the benefits and opportunity costs of the changes you propose? Consider the impact on economic growth, price stability, and unemployment. - The benefit would be the economic growth because people would be having to pay less, prices would fall, and people might be less unemployment. The cost is that government would be making less money through taxation it would have less money for government services.

Scenario 2:

The government is currently spending three billion, seven hundred million on programs and brings in two billion, nine hundred million through taxation. In addition, the nation has experienced a period of rising unemployment. 8. Does this create a budget surplus or deficit? Explain. - This creates a deficit because the government is spending more than they collect when taxing people. 9. As a member of Congress, what changes would you suggest to fiscal policy to balance the budget? Explain at least two ways you would use the tools of fiscal policy to balance the budget by recommending an "increase" or "decrease" to each tool in your explanation. - I would increase taxes. 10. What are the benefits and opportunity costs of the changes you propose? Consider the impact on economic growth, price stability, and unemployment. -The unemployment rate would not change much but the benefit would be more price stability if the budget is balanced. 11. How might your efforts to balance the budget conflict with efforts to decrease unemployment, if at all? - My efforts would not address the unemployment because the way to do that is by lowering taxes but if I do that then the federal budget would still be unbalanced.

Scenario 3: The nation is currently experiencing a period of rising prices. Inflation is making consumer goods increasingly difficult to afford as wages have remained constant. 12. As a member of Congress, what changes would you suggest to fiscal policy to balance the budget and indirectly address inflation? Suggest at least two specific changes to revenue and expenditures. - The best way to fix this issue is to decrease spending and increase taxes. 13. What are the benefits and opportunity costs of the changes you propose? Consider the impact on economic growth, price stability, and unemployment. - The benefit would be slow inflation, but the cost would be higher unemployment rate. 14. Are the proposed policies contractionary or expansionary? Explain. - It is a contractionary policy because it seeks a reduction in government spending and to expand the money supply to encourage economic growth and fight inflation....