Fiscal Policy: Modules 20, 21, 30, and 29

AP Macroeconomics - Morrow Fiscal Policy: Modules 20, 21, 30, and 29

Due Monday: March 9:

1. Economics in the News Goal 50 points Due by 2:40. See articles below as options for earning points this 9 weeks. You will have to complete the articles later as a part of the unit (see March 18 assignments), so you might as well complete them now.

2. We will take the Online Economics Challenge Test on Friday March 13. (The LAST day to qualify!) Take a look at this information now before the upcoming test. For information, photos from last year’s competition, and practice tests, go to http://www.alcee.org/economics-challenge.html and https://econchallenge.unl.edu/Home/Practice

(The top ten online teams will be invited to UAB for the state competition.)

3. Pre-read Module 20 and Module 21. Consider the following questions when you complete your pre-reading:

 Define expansionary fiscal policy and contractionary fiscal policy.  Explain what the government hopes to achieve with its fiscal policy regarding prices and employment.  Where does the government get its money from when it conducts fiscal policy?  Identify the “best” way of financing the government’s deficit spending.

Due Tuesday: March 10 1. WB: Read and highlight page 165. 2. WB: Complete pages 167-170. Also page 171 (Fiscal only) 3. Re-read Module 20. Complete full complement of end of chapter activities, pages 207-208. 4. Re-read Module 21. Complete full complement of end of chapter activities, pages. 213-214. 5. Read the summary items on page 215-216 carefully. Own these terms!

Due Wednesday March 11/12:

1. Read Module 30. Complete the multiple choice questions only at the end of the chapter, pages 305-306. 2. Reread the notes you have already taken on The Leading Economic Indicators. 3. Breaking down spending in Obama’s budget proposal. Go to http://www.washingtonpost.com/wp-srv/special/politics/presidential-budget- 2015/. Read the report and note the cost of certain programs. Select three programs that you would cut entirely, but feel really bad doing it. When complaints come flying in, you would just tell people the government cannot afford the program.

AP Macroeconomics Morrow Fiscal Policy Page 1 Now go to the http://www.publicdebt.treas.gov/index1.htm. Go to U.S. Public Debt. Select the Green Oval “See the U.S. Public Debt to the Penny.” Go to the left side of the screen and select Interest Reports. Select “Interest Expense on the Debt Outstanding.” Consider the question: Could you reinstate the programs you just cut if you were able to find the money? Explain your rationale. Draw conclusions about what you discovered.

Due Friday March 13:

1. Economics Challenge Test (In-class activity. If you are not in attendance, I will have to reconstitute the teams. If you know you are going to be absent, let me know in advance so I can handle the logistics.) 2. WB pages 173-175.

Due Monday March 16:

****Attend class for the very complicated lesson on the Net Export Effect.

Due Tuesday March 17: (Morrow at Berry Middle School for the day.) Film on Fiscal Policy/Debt.

Due Wednesday/Thursday March 18-19

1. Read Module 29. We cover the Loanable Funds Market graph for this unit but not the Liquidity Preferences Graph. This graph will be covered when you learn about Monetary Policy. We will refer to this graph as the Money Market Graph. 2. Complete the full complement of activities for Module 29, pages 286-287. 3. Read and highlight pages 139-140 WB. 4. Complete page 183, WB. 5. Challenging WB pages: 141-142, but not question 4C on the bond market). 6. Team Activity (time permitting). Present answers on a super gigantic post it note that I will provide. (One given below for a heads up advantage and one that you will see for the first time.) Remember, if the question asks you to “describe” or “explain” then you should write “…because…” If you are absent, you must present the answer to the question below on Monday to receive credit for this activity.

Assume that the United States economy is currently in a recession. a. Using a correctly labeled graph show the effects of government action choosing fiscal policy to correct this problem and explain the consequences. b. Using a correctly labeled graph show the effects of government action on net exports and explain the consequences of fiscal policy. c. Indicate what will happen to the value of the United States dollar given the government’s use of fiscal policy.

7. Present this as an Economics in the News Template. The New York Times “Japan’s Big-Works Stimulus Is Lesson” http://www.nytimes.com/2009/02/06/world/asia/06japan.html? pagewanted=all&_r=0

AP Macroeconomics Morrow Fiscal Policy Page 2 8. Present this as an Economics in the News Template. The Wall Street Journal. Harvard economist Robert Barro’s editorial Keynesian Economics vs. Regular Economics. Consider this question: Who is correct, Vilsack or Barro regarding the benefit of transfer payments as a way to stimulate growth? http://online.wsj.com/article/SB1000142405311190359690457651641207344585 4.html

9. Present this as an Economics in the News Template. Will Hurricane Cleanup Stimulate the Economy? Interview by Steve Inskeep – Planet Money’s Adam Davidson. Listen to the audio: http://www.npr.org/2011/08/31/140079524/will- hurricane-cleanup-help-stimulate-the-economy

Friday March 20

Test. Study Guide below.

AP Macroeconomics: Fiscal Policy Study Guide

1. State the responsibility imposed on the Federal government by the Employment Act of 1946 and the creation of the Council of Economic Advisors and the Joint Economic Committee.

2. Distinguish between discretionary and nondiscretionary fiscal policy.

3. Describe contractionary fiscal policy and the effect of spending and tax policy options on AD.

4. Describe expansionary fiscal policy and the effect of spending and tax policy options on AD.

5. Explain how the expansionary effect of a budget deficit depends on the method used to finance it.

6. Describe how the deflationary effect of a budget surplus depends on the method used to finance it.

7. Assess whether it is preferable to use government spending or taxes to counter recession and reduce inflation.

8. Define automatic or built-in stabilizers.

9. Indicate how the built-in stabilizers help to counter recession and inflationary pressures.

10. Describe the relationship among progressive, proportional, and regressive tax systems and the built-in stability of the economy.

11. Distinguish between the actual budget and the full-employment budget for evaluating fiscal policy.

12. Describe recent U.S. fiscal policy using the full-employment budget.

AP Macroeconomics Morrow Fiscal Policy Page 3 13. Use the full-employment budget to evaluate the status of discretionary fiscal policy.

14. Outline three timing problems that may arise with fiscal policy.

15. Discuss the political considerations affecting fiscal policy.

16. Explain how policy reversals change the effectiveness of fiscal policy. 17. Describe how changes in state and local finances may offset fiscal policy at the federal level.

18. Explain and use a graph to illustrate the crowding-out effect of an expansionary fiscal policy.

19. Describe two ways that the effectiveness of domestic fiscal policy is complicated by the connection of a national economy with the world economy.

20. Discuss current thinking on fiscal policy.

AP Macroeconomics Morrow Fiscal Policy Page 4