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Fiscal Policy Paper 2

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Fiscal Policy Paper 2
Fiscal Policy Paper
Justin Anderson, Andrew Bristow, Latoya Hughes, Teresa O 'Rear, Kira Sparks, Erlin Reyes
ECO/372
05/11/15
Godwin Quashigah

Fiscal Policy Paper Kira’s Intro:

How it will Affect Tax Payers
When our Country goes through ups and downs of its economy the one thing we know to be true is that we, the taxpayers are directly affected. The US’s budget deficit is when Federal spending is greater than the tax revenue received in that same year. In the year 2014, the “budgeted deficit was projected to be $649 billion (Amadeo, 2015). When the U.S. goes through a deficit, the taxpayers are called upon to alleviate the low supply of money within the economy. This typically means taxes could increase. Taxpayers are also greatly affected when there is a surplus in the economy as well. Even when there is a surplus and there is enough money in the economy, taxpayers still have to pay taxes. Unfortunately they don’t decrease or disappear in this situation. The country’s debt probably affects taxpayers the most. Our economic debt “has the potential to affect our daily lives in a big way, primarily in the forms of higher interest rates and ultimately, a slower economy (Handley, 2015). When the economy is in debt, it is the tax revenue that is used to pay off the debt the country has gotten itself into.

Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883–1946), who believed governments could change economic performance by adjusting tax rates and government spending. Expansionary fiscal policy happens when government spending exceeds tax revenue, and is usually undertaken during recessions. The goal of expansionary fiscal policy is to close a recessionary gap, stimulate the economy, and decrease the unemployment rate. This is accomplished by increasing aggregate expenditures and aggregate demand through an increase in government spending both government purchases and transfer payments or a



References: Bureau of Economic Analysis. (April 2, 2015). Retrieved from http://www.bea.gov Villarreal, P. (2009). Social Security and Medicare Projects. Retrieved from http://www.ncpa.org

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