largest category was health care, social services and education then transportation and • housing largest tax cuts was individual then infrastructure • the changes were made to be temporary •
The actual movements in RGDP and employment is hard to measure just from the stimulus alone. • CBO tried to measure it. They determined it helped but only by a small amount. Without ARRA reduced unemployment from 11.4 to 10% but that was all increased government debt made the deficit worse and hurt us more during recession • Keynesian theory John Keynes argued the government purchase multiplier might be greater then 10. (it is now • proved to be less then 2) They also developed the tax multiplier • declares fiscal policy is necessary • deficit, surplus, and debt when we say deficit we mean money against revenue lost in one year, while debt is all money • owed budget deficit the situation where the government expenditure are greater then tax revenue • budget surplus the situation where the government expenditure are less then tax revenue • we are usually in deficit (except for 2001) • cyclically adjusted budget deficit or surplus means the deficit or surplus in the fed government • budget if the economy were at potential GDP when GDP is above potential more taxes are paid and there are lower transfer payments causing • total spending to rise less then it would have reducing too high inflation few believe the government should balance there budget every year , they would have to mess • with taxes every year some economists agree that a deficit is normal, if it is over long run bills because we should take • a while to pay for a house for example every time the federal government runs a budget deficit the treasury must borrow funds from • investors by selling treasury securities Budget deficit = (T- G) < 0 • Budget surplus = (T-G) > 0 • Debt= sum of deficit + surplus • Is the national debt a problem Total value of US treasury bond outstanding is called the federal government debt or national • debt If debt is high you will have to cut back • ultimately the government can raise through taxes what it needs to make up debt interest • payments but if that gets to high it can hurt consumption and RGDP Interest payment is currently at 11% which the federal expenditure which is "good" • if some of the debt was brought about through infrastructure such as bridges or education it can • help the economy in the end the government just needs to watch out for the size of GDP relative to the interest rate. This is • way problems can occur
You've reached the end of your free preview.
Want to read all 18 pages?