1Economics 102Lecture 17: Fiscal PolicyLECTURE 17FISCAL POLICY1Fiscal Policy❧In 2007, the federal government planned to spend 21.1 cents out of each dollar earned in the United States and collected 18.2 cents per dollar in taxes.•How does the government’s planned deficit affect the economy?LECTURE 17FISCAL POLICY2In this chapter, look for the answers to these questions:❧What is fiscal policy and how does it operate? ❧In what two ways does fiscal policy affect aggregate demand? ❧How might fiscal policy affect aggregate supply?❧What are the arguments for and against using policy to try to stabilize the economy?
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2LECTURE 17FISCAL POLICY3The Federal Budget❧The federal budgetis the annual statement of the federal government’s outlays and tax revenues.❧The federal budget has two purposes:••❧Fiscal policyis the use of the federal budget to achieve macroeconomic objectives, such asLECTURE 17FISCAL POLICY4The Federal Budget❧The Institutions and Laws•The President and Congress make fiscal policy.•The figure shows the timeline for the 2007 budget.LECTURE 17FISCAL POLICY5The Federal BudgetEmployment Act of 1946Fiscal policy operates within the framework of the Employment Act of 1946in which Congress declared that. . . it is the continuing policy and responsibility ofthe Federal Government to use all practicable means. . . to coordinate and utilize all its plans, functions,and resources . . . to promote maximum employment,production, and purchasing power.