...-What did your daily spending diary reveal about your spending habits? What areas of spending might you consider changing? - Most of spending are fix and the education spending is the half of total expenditure -What information from your Daily Spending Diary might encourage you to use your money differently? - I do not consider I may use my money differently. -How might your daily spending diary assist you when identifying and achieving financial goals? -A daily spending diary for a period of time can help me to track my cash flow and money management. It provided information to better understand my spending patterns and to help me achieve desired financial goals. -How can your daily spending diary assist you when planning and implementing a budget? - I would consult the record to adjust my next planning...
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...Fiscal Policy? When the supply of money is economic constant, government expenditures must be financed by either taxes or borrowing. Fiscal policy involves the use of the government’s spending, taxing and borrowing policies. The government’s budget deficit is used to evaluate the direction of fiscal policy. When the government increases its spending and/or reduces taxes, this will shift the government budget toward a deficit. If the government runs a deficit, it will have to borrow funds to cover the excess of its spending relative to revenue. Larger budget deficits and increased borrowing are indicative of expansionary fiscal policy. In contrast, if the government reduces its spending and/or increases taxes, this would shift the budget toward a surplus. The budget surplus would reduce the government’s outstanding debt. Shifts toward budget surpluses and less borrowing are indicative of restrictive fiscal policy. It is important to note that a budget deficit is different from the national debt. A deficit occurs when government spending exceeds revenue over a year, quarter or month. A deficit will increase the size of the national debt. Put another way, the deficit adds to the outstanding stock of IOUs issued by the U.S. Government and not yet repaid. Conversely, a budget surplus will reduce the size of the national debt. A surplus permits the government to pay off some of the holders of the federal government’s IOUs. These holders are the bondholders of U.S. Treasuries Bonds...
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...Name: __________________________ Date: _____________ 1.|Explain the following concepts:IS shocks, LM shocks| 2.|Use the IS/LM-AD/AS model to illustrate graphically how expansionary fiscal and monetary policy can help stabilize the output when economy is in a recession. | 3.|Use the IS-LM model to derive the AD curve and to show how expansionary fiscal and monetary policy can shift the AD curve. | 4.|A decrease in government spending reduces output more in the Keynesian-cross model than in the IS-LM model. Explain why this is true.| 5.|Use the IS/LM-AD/AS model to graphically analyze short-run & long-run effects of a negative IS Shock.| 6.|Assume that an economy is characterized by the following equations:C = 100 + (2/3)(Y – T)|T = 600|G = 500|I = 800 – (50/3)r|Ms/P = Md/P = 0.5Y – 50r|a.|Write the numerical IS curve for the economy, expressing Y as a numerical function of G, T, and r.|b.|Write the numerical LM curve for this economy, expressing r as a function of Y and M/P. |c.|Solve for the equilibrium values of Y and r, assuming P = 1.0 and M = 1,200. How do they change when P = 2.0? Check by computing C, I, and G.|d.|Write the numerical aggregate demand curve for this economy, expressing Y as a function of G, T, and M/P.|| 7.|Assume the following model of the economy, with the price level fixed at 1.0:C = 0.8(Y – T)|T = 1,000|I = 800 – 20r |G = 1,000|Y = C + I + G |Ms/P = Md/P = 0.4Y – 40r|Ms = 1,200||a.|Write a numerical formula for the...
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...States has exceeded over $1 trillion and debate is raging over how to reduce the budget deficit without further negative impacts on the economy, business, and jobs. As the federal government approaches the borrowing limit of $14.3 trillion, the Democrat argument is to raise the debt ceiling in order to allow for continued borrowing and meet current financial obligations or default on its debt or risk financial collapse as a result of decreased creditor confidence (Toomey, 2011). Republicans have countered that they will not allow debt ceiling increases without substantial cuts in spending and without increases in taxes (Toomey, 2011). The article, “Democrat Budget Proposal is Unrealistic,” posted on www.caldwellteaparty.org, provides as its’ central thesis that government spending should be decreased to 2008 levels and claims that the current Democrat-led administration as having “recorded and performed the most gargantuan, massive, unconscionable, ruinous, explosive, erratic, careless, extreme, astronomical increase of the deficit EVER in U.S. History” (snaketread, 2011, para. 7). This article is examined and a rebuttal provided to its various claims. Analysis and Rebuttal The central thesis of the article is that government spending should be reduced to 2008 levels and that the recent budget deficit issue is the result of gross overspending of the current administration’s policy of big government, big spending, and intervention that hampers business (snaketread, 2011). ...
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...Balanced Budget Todd Driscoll ECO 203 Principles of Macroeconomics Instructor: Jason Friedline October 23, 2012 Balanced Budget Economists generally agree that high budget deficits today will reduce the growth rate of the economy of the future. The difference between what a government spends and what it collects in taxes in a given period is known as a budget deficit. There are many reasons why this might happen. One might be that if our government keeps spending money that does not exist obviously the more debt will accumulate. The government cannot keep this up without creating more debt. It the same as budgeting you personal accounts. If you get a new credit card or loan to consolidate old debt and then re-use your old cards, it rather defeats the purpose of getting out of debt. Another reason might be that due to the enormous loss of jobs there are less taxes being paid to pay our nations bills or to re-invest back into the economy. There is no point to list these reason in number order there are so many. If the deficit is growing it affects the nation savings, in turn, reduces national income. This may become possible if interest rates go up or domestic investments fall. Economists agree these a few things on when it comes to a high deficit. Deficits over a short period do not really have much affect, because the United States can borrow to cover these gaps due to the dollar’s value as the leading currency. If the deficit is sustained over a long period...
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...government spending during a time of recession? Congress should increase government spending in order to “prime the pump” of the economy. At the same time, he recommends, Congress should decrease taxes in order to give households more disposable income with which they can buy more products. 2. According to Keynes, what should the government do to taxes and government spending during a period of rapid inflation? Keynes advocates the opposite positions during times of rapid inflation. In order to slow down the economy, Keynes calls for Congress reduce government spending in order to reduce pressure on aggregate demand. For the same reason he calls for tax increases in inflationary times, to reduce consumers' disposable income. 1. How can the Federal Reserve use the reserve requirement, the discount rate, and open market operations during a time of recession? Keynes recommends that the Fed reduce the reserve requirement during a serious recession. If banks are allowed to release more of their reserved funds for loans, the lowered interest rate will again entice consumers and firms to borrow funds to make purchases, increasing the aggregate demand. Keynes recommends that the Fed buy bonds on the open market. By increasing the reserves the banks hold, the banks have more money available to loan and can reduce their interest rates. At lower interest rates, consumers and firms are more willing to borrow to make purchases, and aggregate demand can increase. 2. How can the Federal...
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...ways Congress can control the statutory budget in order to prevent tax and mandatory spending legislation from increasing the deficit that constricts the discretionary budget. In 2010, the Statutory Pay-As-You Go (PAYGO) Act was passed which maintains that any changes to taxes or mandatory spending, which increase the multi-year deficit must be offset in an equivalent amount through other changes which in turn decrease the deficit. Any violation of this act results in a sequestration across select mandatory programs in order to restore the balance in the budget. The second way Congress may control the budget is through discretionary funding caps. Through the 2011 Budget Control Act (BCA), Congress imposed limits on the amounts...
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...basic floor of income or minimum standard of living for low income households. Current Government Spending This is spending on state-provided goods & services that are provided on a recurrent basis every week, month and year, for example salaries paid to people working in the NHS and resources for state education and defence. The NHS claims a sizeable proportion of total current spending – hardly surprising as it is the country's biggest employer with over one million people working within the organisation! Capital Spending Capital spending includes infrastructure spending such as new motorways and roads, hospitals, schools and prisons. How does government spending affect businesses? The level of government spending has many direct and indirect effects on all businesses. For firms selling goods and services to individual consumers and to other firms: Increased government spending may mean higher taxes Higher taxes reduce the ability of customers to purchase goods and services, which is likely to reduce consumer spending Consequently increased government spending is often at the expense of private sector spending and is therefore potentially harmful to some firms On the other hand, many businesses rely on government spending for their revenues and profits. For businesses that supply services to the public sector, demand is directly linked to how much government is spending. Good examples include: Construction firms that build and repair the road network Publishers who...
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...mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmdddddddddddddddddddddddddddddddddddddddddd.ddddddddddddddddddddddgfyufyddrasdgfghkjlkhytewasdghjhjkjkjkjnkhjbjhvhgcgxcgvhbnkmmnbvhvghhcfgxdcbn.sdcgvjnjknbvhgccgj.dxsdvgghbjb.gftsrsrtsdgihufdtrstygukjnhjkk.drdcggk.upply of money is economic constant, government expenditures must be financed by either taxes or borrowing. Fiscal policy involves the use of the government’s spending, taxing and borrowing policies. The government’s budget deficit is used to evaluate the direction of fiscal policy. When the government increases its spending and/or reduces taxes, this will shift the government budget toward a deficit. If the government runs a deficit, it will have to borrow...
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...Finally, I will examine the views of monetarist and Keynesians regarding the effectiveness of both policies in raising the level of national l income and also consider the extreme cases. The IS-LM model was initially developed by John Hicks in 1937 but was made popular in 1949 by Hansen in order ‘to provide a framework for analysing the factors determining the level of aggregate demand’. The IS-LM model is a short run model of the determination of output. It shows the unique combination of income and interest rates that lead to an equilibrium in both the goods and money market at the same time (Begg, 2008). The IS-LM model is presented on the diagram below. The IS (Investment and saving) curve represents all equilibriums for which total spending (consumption and investment) equals total output. It reflects equilibrium in the goods market and operates on the assumption that investment is equal to savings. (Pettinger, 2008) Keynesianism emphasizes the role that fiscal policy can play in stabilizing the economy. In particular...
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...Vanessa Monge 9/9/2013 ECO372 Mr. Frank Vigil Economic Advisement Paper There are different schools of thought about how the economy arrived at its current state. Conversely, there are different schools of thought on how to restore the economy. There are some who would advocate that going back to the same economic policies that created the currents conditions of the economy. In the following paragraph of this paper team B will discuss the current state of the United States economic recovery from the prospective of Unemployment, Consumer income, Interest rates, and Expectations respectively. This information will be summarized and recommendations made to the president regarding government spending and taxes based on the aforementioned economic factors. Unemployment Unemployment is affected by multiple economic factors. A recently suggested factor is consumer and private sector uncertainty. This uncertainty is created by the lack of confidence in the current state of the economy and its recovery. This has forced consumers and the private sector to reduce spending and cut cost, thus driving unemployment. Recent studies have demonstrated that uncertainty has been harming current economic activity. Consumer uncertainty is driving the decline in aggregate demand which forces the reduction in supply. When supply decreases, businesses respond by reducing spending and cutting back cost forcing a reduction in force. The moderate economic recovery drives policy makers to respond to...
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...Goodbye Debt Crisis For the past few years, the United States has been running on a budget deficit of historic proportions. By spending more than it is earning in tax revenues. To fund this deficit, the United States has to go into more debt, making Congress impose a limitation on how much the government can borrow. When the United States elected Barrack Obama, the nation thought the deficit would soon be reduced. Obama had vowed to cut the deficit in half by early 2009, but since then, he has continuously cut taxes and increased spending, which in return increases the amount of debt for the nation. Since the United States is still unable to find a way to increase its revenues, the nation’s super committee will soon have to make a decision on how to achieve its reduction goal of 1.2 trillion dollars. Republican and Democratic politicians have been going back and forth for years on what the best strategy is to raise revenues for the United States. Most of the earlier acts in the 1980s and 1990s relied heavily on tax increases to do most of the work for the deficit reduction. On the contrary, by the year 1997, tax increases were entirely ruled out as a source of deficit reduction. Each political party’s view on deficit reduction plans tends to be opposites. Many politicians are arguing that Congress will never come to a decision on what path to take to reduce the nation’s debt. Both political parties have strong beliefs on what is the best way to overcome this deficit. Democrats see...
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...responsible for managing the overall pace of economic activity, with its objective of maintaining high levels of employment and controlling price stability (inflation). It has two main tools for achieving these goals: fiscal policies, which is done through taxes and spending and monetary policies, through which it manages the supply of money. In this paper, I will discuss the why high deficits of today will reduce growth rate of the economy in the future, look at the history of our nation’s debt and deficits, different elements that causes of deficit and why the cause actually matters, what role the fiscal and monetary policies have to lead to higher or lower budget deficits and how deficits affect the overall long-term economic growth and debt of the U.S. Let us first begin by learning the difference between the terms debt and deficit. In economics, the term deficit means a shortfall in revenue of a fiscal year. It is when the government’s revenue called receipts, which are collected taxes (payroll, corporate, excise, income and social insurance), fee revenues and tariffs that are called receipts are lower that what is spent called outlays. In other words, the federal budget deficit is the yearly amount by which spending exceeds revenue. The term debt is described as an accumulation of deficits so the national debt is the total amount of money owed by the government. It is calculated by adding all of the deficits minus the surpluses since the nation’s inception and you get the...
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...eight guideposts of economic thinking to government spending and taxation has been especially persuasive, both because of improvements in statistical research techniques and because more data become available with each passing year. As the Organization for Economic Co-operation and Development explains, The empirical growth literature has developed substantially over the past two decades, drawing on larger and richer databases and exploiting better econometric tools to explain cross the country differences in growth performance Isolating the precise effects of one type of government policy-such as government spending-on aggregate economic performance is probably impossible. Moreover, the relationship between government spending and economic growth quite possibly depends on factors that can change over time. Another important element of the academic research is methodology. When scholars attempt to measure a relationship between government spending and economic performance, they can pursue this research in a number of ways. They can conduct a statistical test to ascertain a relationship between two or more variables, but this still leaves many questions. Are they testing to find a relationship over a period of time? Are they testing to find a relationship using cross-country data? Academics can also build complete economic models and then try to determine whether the evidence supports that model. But what kind of model? What are the assumptions in that model? Will the model...
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...How To Reduce Federal Deficits Like most Americans I want to educate myself in ways to reduce the deficit of this nation so I can sleep more sound at night. U.S. federal deficits should be reduced by cutting certain entitlement programs, implementing privatization, and increasing taxes on the rich. In this essay, I will provide hard facts that will not only reduce federal deficits, but also increase productivity and employment. These are specific ways to cut spending and raise revenue. Medicare, Medicaid and Social Security are the three of the government’s most popular and relied upon programs. Congress needs to curb the growth in spending on them and other entitlements. Entitlement programs have accounted for more than fifty percent of the federal spending since the 1980’s. It’s the biggest driver of the long-term national debt. Eliminate all the wast, fraud and abuse you can find. Over eighty billion is defrauded from these programs every year. Cut more out of discretionary programs, that includes defense. All these moves combined may not clear the national debt, but that’s because theyre not the main cause of long-term deficits. With an aging population and rising health care costs which in return there are fewer workers per retiree paying taxes into the programs. As a result speding on medicare, Medicaid, and to an extent Social Security will rise substantially absent structural changes. Most specifically in the way health care is delivered and reimbursed. When measured...
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