Unit 3 March 6

• Fiscal policy 
• Changes in spending 
• 2 tools of fiscal policy 
• taxes- government can increase or decrease takes 
• spending- government can increase or decrease 
• fiscal policy is enacted to promote our nations economic goals: full employment, price stability, economic growth
• Deficits, surplus and debt
• balanced budget 
• revenues = expenditures
• Budget deficit
• revenues < expenditures
• Budget surplus
• Revenues > expenditures
• Government must borrow money when its runs a budget deficit 
• individuals
• Corporations
• Financial institutions
• foreign entities or foreign government 
• Fiscal policy two options 
• Discretionary fiscal policy ( Congress )
• Expansionary fiscal policy- think deficit
• Contractionary fiscal policy- Surplus
• Non-Discretionary fiscal policy ( no action )
• Three types of taxes
• Progressive tax- takes a larger percent from higher income group
• Proportional taxes ( flat rate )-takes the same percent of income from all income groups
• Regressive taxes- takes a longer percentage from low income groups
• Contractionary fiscal policy ( the brake )
• law that reduce inflation, decrease GDP ( close a inflationary GDP )
• Decrease government spending 
• tax increase 
• combination of the two 
• Expansionary fiscal policy ( the gas )
• laws that reduce unemployment and increase GDP ( close a recessionary gap ) 
• increase government spending 
• decrease taxes on consumer
• combination of the two 
• Automatic or built in stabilizers 
• anything that increase the government budget deficit during a recession and increase its budget surplus during inflation without requiring explicit action by policymakers 
• Transfer payment 
• Welfare checks
• food stamps
• unemployment checks
• corporate dividends
• social security 
• veterans benefits