Summary Chapter 14– Fiscal Policy

ECON 205– Chapter 14
Fiscal Policy
- Idk man

14.1) The Government Budget
- The federal budget is the major document describing fiscal policy in the US.
- Also estimates surplus and deficit to make proposals for tax and spending
- Setting the Annual Budget
- President submits a new budget each year to congress
- This budget applies the taxes and spending of the last year
- Part of the State of the Union then addresses the budget
- Council of Economic Advisors prepares and releases the Economic Report of the
President
- Congressional Budget Office makes economic forecasts too
- The president can only change a small part of the budget until legislation is
passed.
- A Balanced Budget versus a Deficit or Surplus
- Balanced Budget: tax = spending
- Budget Deficits: tax < spending
- Budget Surplus: tax > spending
- Deficit and surplus are flow.
- In budget deficients when tax revenue is lower than expected, the government
borrows money by issuing bonds.
- Proposed budget vs actual budget:
- President submits a proposed budget to congress
- Actual amounts of tax and fiscal revenue are different usually different from now
- Congress adjusts this, and passes the president’s budget