Chapter 1 Web Activities

Chapter 12 - Fiscal Policy

Chapter 12 Web Activities

1. Go to the Congressional Budget Office’s (CBO) Budget and Economic Information page (http://www.cbo.gov/topics/budget/budget-and-economic-outlook). Use the historical budget link on this page to answer the questions below. a. Identify all periods where the government ran a budget surplus in the past 40 years. (Refer to the “on-budget” deficits and surpluses.) b. Who was president during these budget surpluses? Is your answer consistent with the characterization of Republicans as favoring small government (less spending) and Democrats as favoring large government (more spending)? What other factors—besides presidential politics—contribute to budget surpluses? c. Refer to the Bureau of Labor Statistics website (http://www.bls.gov/) for data on inflation during the periods of budget surplus that you identified in part a. Was inflation relatively high (over 3%) or low (under 2%) during these budget surpluses? Were the budget surpluses you identified in part a consistent with the inflation at the time? Why or why not?

2. Go to the Conference Board’s website (http://www.conference-board.org/) and click on “Economic Indicators.” From there, choose “Consumer Research” and find the most recent memo just to the left and below the Consumer Confidence Index®. (Hint: If you need more information to answer the questions below, try this additional website: http://www.tradingeconomics.com/united-states/consumer-confidence ) a. What has been happening to consumer confidence over the last six months? What explanation for consumer confidence does the memo give? b. What component of AD is affected by consumer confidence? Is this likely to have a large impact on AD? Why or why not? c. All else equal, what impact would this change have on real GDP and the price level? Justify your answer with an AD/AS diagram.

3. Visit Recovery Review, which allows you to search for and visualize stimulus (American Recovery and Reinvestment Act) data, at http://recoveryinteract.com/ (the site requires the installation of Silverlight). a. How much stimulus money has been awarded? How many jobs have been reported as having been created by stimulus spending? b. Search for stimulus projects in your zip code (or in the nearest zip code for which you can find data). How much money has been spent in your zip code, and how many jobs have been created? c. Do a keyword search to find stimulus spending related to the industry in which you plan on working after college (or in which you currently work). How much spending has there been, and how many jobs have been created? d. Combine your searches in parts b and c into one search. Report the spending/job creation matching your keyword in your zip code.