Macro 13
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This document provides an overview of fiscal policy, deficits, and debt. It discusses key topics like the objectives of fiscal policy in addressing unemployment and inflation, as well as automatic stabilizers. It also examines deficits and debt, noting that deficits occur when spending is greater than revenues and debt accumulates from deficits over time. The national debt is currently over $15 trillion or $45,455 per person. The document explores arguments for and against government debt. It also discusses ways to reduce deficits like increasing taxes, lowering spending, and addressing entitlement programs and interest on the debt.
Macro 13
- 2. Macroeconomics Lecture 13 Fiscal Policy Deficits and Debt
- 3. Questions
- 6. P2 P3 Price Level Real GDP orY Modern Keynes Model 18 Long Run Aggregate Supply Short Run Aggregate Supply 19 P1 Aggregate Demand 17 Unemployment Inflation Recession
- 7. Time Lags Do you really know? Congress approve Effect lag Take 1- 3 years Counterproductive
- 8. Multiplier May not be as large as Keynes calculated
- 10. Automatic Stabilizers Smooth out highs and lows Taxes Unemployment Insurance
- 11. Automatic Stabilizers Job Unemployed Job Taxes Insurance Taxes
- 12. Deficits and Debt Government Spending and Revenue
- 17. Balanced Budget Spending exactly equals revenues
- 18. 0.00% 0.75% 1.50% 2.25% 3.00% 3 month 6 month 12 month 2 year 5 year 10 year 30 year TreasuryYields
- 23. Debt $15 trillion $45,455 per person
- 25. Why would you want government to go into debt? Don’t have to pay Future larger economy
- 26. Debt Investment Only if the return is higher than the interest rate
- 27. Debt Investment Only if the return is higher than the interest rate
- 28. How to reduce deficits Higher taxes Lower spending
- 29. Entitlements Guaranteed benefits 1960 - 20% 2017 - 60%
- 30. Entitlements Guaranteed benefits 1960 - 20% 2017 - 60%
- 31. Interest Expense $240 billion 2.0% current rate 6.2% historical 1962-2017
- 33. Solution to Debt Economic Growth