Fiscal Policy

How the government collects and spends

money to meet broad economic goals.

Taxes

• Proportional Taxes– Same proportion (percentage) from everybody– i.e. Flat Tax

• Progressive Taxes– More from the rich than from the poor– i.e. Progressive Income Tax

• Regressive Taxes– More from the poor than from the rich– i.e. Sales Tax

Tax Receipts

Fiscal Policy Strategies

• Supply-side Model (conservative)– Tax cuts create economic growth

– Spending cuts lower inflation

• Keynesian model (Demand-side)(liberal)– Gov’t spending and taxing can cure economic ills.

• Unemployment: Spending creates jobs

• Inflation: Taxing deflates currency

Federal Budget

• Federal Spending - Federal Revenue

• Revenue > Spending = Surplus

• Spending > Revenue = Deficit

• Total Deficits = Federal Debt

Federal Debt

http://www.brillig.com/debt_clock/