Fiscal Policy- Spending

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In President Obama’s speech about the federal budget, which government policy is he speaking about?

fiscal policy

What is the main goal of the creation of the federal budget?

to decide how to manage the government’s tax revenue and expenditures

When I took office 3 years ago, my Administration was left an annual deficit of $1.3 trillion, or 9.2 percent of GDP, and a projected 10-year deficit of more than $8 trillion. . . .

Together with the deficit reduction I signed into law this past year, this [new] Budget will cut the deficit by $4 trillion.

—President Barack Obama,
2012 Budget Message of the President

What is the purpose of the president’s statement?

to show how changes in fiscal policy can affect the economy

Together with the deficit reduction I signed into law this past year, this Budget will cut the deficit by $4 trillion over the next decade.

This will put the country on a course to a level of deficits below 3 percent of GDP by the end of the decade, and will also allow us to stabilize the Federal debt relative to the size of the economy.

—President Barack Obama,
2012 Budget Message of the President

What does it mean to measure a government’s deficit "relative to the size of the economy"?

to measure the deficit as a percentage of the economy or GDP

Meeting the spending targets in this Budget meant some very difficult choices.

—President Barack Obama,
2012 Budget Message of the President

What does it mean to make "difficult choices" when creating a federal budget?

deciding what will be funded and what will be cut

[C]utting programs that were not effective or essential and even some that were, but are now unaffordable; and precisely targeting our investments. Every department will feel the impact of these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth.

—President Barack Obama,
2012 Budget Message of the President

In this statement, which type of spending is President Obama referring to?

discretionary

[H]ave the highest proportion of college graduates in the world by 2020. To reach that goal, we increased the maximum annual Pell Grant by . . . $900 to help nearly 10 million needy students afford a college education. . . .

We are continuing our effort to prepare . . . 100,000 science and math teachers. . . .

To prepare our workers for the jobs of tomorrow, we need to turn our unemployment system into a re-employment system.

—President Barack Obama,
2012 Budget Message of the President

Which aspects of economic growth is the president addressing in this passage? Select all that apply.

ways to inject capital into the economy ways to encourage increased productivity ways to decrease unemployment

In three to four sentences, summarize the overall message within President Obama’s speech.

Use what you have learned throughout the lesson to explain why it is important that citizens understand the government’s budget.

President Obama is focused on two main points in his speech He talked about lowering the national debt and spending. He also focused on education. Obama believed that investing in education for the future will help keep the US economy strong in the future.

When a government creates a budget, it is seeking a way to

allocate money to programs and projects.

The diagram shows an aspect of fiscal policy.

What aspect of fiscal policy does this diagram show?

government spending to strengthen the economy

The graph shows the federal budget from 1980 to 2010.

What conclusion can be drawn from this graph?

The federal budget is usually unbalanced.

Which of these effects of expansionary spending would a government most want to avoid?

higher inflation

Which statements accurately describe debts and deficits? Check all that apply.

A government’s budget deficit causes debt to increase. Debt requires a government to pay back more than it has borrowed. The deficit is the amount a government spends above what it brings in.

What does deficit spending require a government to do?

take on debt

"Meeting the spending targets in this budget meant some very difficult choices."
President Barack Obama,
2012 Budget Message of the President

Read the passage.

What did the president mean when he said he had to face "very difficult choices" when creating a federal budget?

deciding what would be funded and what would be cut

The graph shows government spending as a percentage of GDP from 1990 to 2012.

At its peak, government spending made up about

one quarter of GDP.

This diagram shows a government’s approach to taxing and spending.

Which of the following would be a good title for this diagram?

Fiscal Policy

The graph shows the federal budget from 1980 to 2010.

In which period did the federal budget show the greatest deficit?

2000 to 2010

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