This document discusses macroeconomics and chapter 17 on the government budget. It covers taxes and spending as tools for fiscal policy, including different types of taxes. It also discusses deficits, debt, and how the current US debt is $21.7 trillion or $65,956 per person. The document examines reasons for government debt and ways to reduce deficits through higher taxes or lower spending. Entitlement programs are discussed as growing from 20% of the budget in 1960 to 60% in 2017.

2. Lecture 17
Macroeconomics

3. Exam 2
Second Chance

4. Chapter 17
The Government Budget
Taxes and Spending

5. Two Objectives
Unemployment
Inflation

6. Monetary
Central Bank
Tools
Reserve Ratio
Discount Rate
Open Market
Excess Reserve Rate
Fiscal
Government
Tools
Taxes
Spending

9. Tax Revenues
Income Taxes
Social Security Taxes
Other

10. Types
Per Head
Flat
Regressive
Progressive

11. Progressive
The more you earn, the
higher the rate

12. Types
Income
Sales
VAT
Property

13. Deficits and Debt
Government
Spending and
Revenue

14. Deficit
Spending greater
than revenue

15. Balanced Budget
Spending exactly
equals revenues

16. Surplus
Revenue greater
than spending

17. Debt
Accumulated
deficits

19. Debt
$21.7 trillion
$65,956 per person

21. Why would you want
government to go into
debt?
Don’t have to pay
Future larger economy

22. Debt
Investment
Only if the return is
higher than the
interest rate

23. How to reduce deficits
Higher taxes
Lower spending

24. Entitlements
Guaranteed benefits
1960 - 20%
2017 - 60%

25. Interest Expense
$240 billion
2.0% current rate
6.2% historical
1962-2017

27. Solution to Debt
Economic Growth

28. Spending Taxes
Aggregate
Demand
Expand Increase Decrease Right
Contract Decrease Increase Left
Fiscal Policies