Who’s Reporting?

Kaycy Aragon Angelica Amparado Chasty Beldad

MANAGE REPORTERS
FISCAL
POLICY
Fiscal policy is the process by which a government changes its
spending and tax rates in order to monitor and control the
economy of a country. A central bank controls a country's money
supply through this strategy, which is similar to monetary policy.

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LEARNING OBJECTIVES

1 2 3 4 5
 LEARNING

1
OBJECTIV
ES
Identify key differences
between the private
sector and government.

LEARNING OBJCTIVES 11-1

 LEARNING

2
OBJECTIV
ES
Describe the short-term
impacts of increased
government spending and use
the multiplier effect to calculate
the effect of fiscal stimulus.
LEARNING OBJECTIVES 11-2
 LEARNING

3
OBJECTIV
Summarize ESthe limitations of
using increased government
spending to stimulate
growth.

LEARNING OBJECTIVES 11-3

 LEARNING

4
OBJECTIV
ESways that
Discuss the
changes in tax rates
affect the economy.

LEARNING OBJECTIVES 11-4

 LEARNING

5
OBJECTIV
Explain how ES the budget
deficit affects the
economy in the short run
and in the long run.
LEARNING OBJECTIVES 11-5
FISCAL
POLICY
Fiscal policy is the process by which a government changes its
spending and tax rates in order to monitor and control the
economy of a country. A central bank controls a country's money
supply through this strategy, which is similar to monetary policy.

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LEARNING OBJECTIVES

1 2 3
 FISCAL

1
POLICY
Fiscal policy is defined as the
economic effect of government
spending and taxes. Fiscal policy looks
at the impact on the economy in both
the short-term and long-term.

FISCAL POLICY Part 1

 FISCAL

2
POLICY
In the short-term, fiscal
policy consists of the
government’s budget
decisions.

FISCAL POLICY Part 2

 FISCAL

3
POLICY
In the long-term, fiscal policy
creates the link between
government spending and
taxation decisions and the
country’s economic growth.
FISCAL POLICY Part 3
THE
GOVERNMENT
• Government spending refers to money spent by the

AND THE
public sector on the acquisition of goods and
provision of services such as education…

ECONOMY
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LEARNING OBJECTIVES

1 2 3 4
 GOVERNM

1
ENT
SPENDING
• Government spending refers to money spent by the
public sector on the acquisition of goods and provision
of services such as education, healthcare, social
protection, and defense.
• Government spending and tax policy have a major
impact on the economy
• Government spends money directly on wages, goods,
and services.
• It also shifts money from some people to others in the
form of Social Security, Medicare, and other programs.

THE GOVERNMENT AND THE ECONOMY Part 1

 SHORT-

2
TERM
IMPACT
In the short-term, an increase in government spending
lowers unemployment and increases GDP, all other
things being equal.

FISCAL POLICYSPENDING
GOVERNMENT Part 2 Part 1
GOVERNMENT SPENDING Part2
 KEYNESIA

3
N
APPROAC
Keynesian economics is a macroeconomic
economic theory of total spending in the economy
and its effects on output, employment, and

H
inflation. Keynesian economics was developed by
the British economist John Maynard Keynes.

KEYNESIAN APPROACH
 MULTIPLIE

4
R EFFECT
The multiplier effect refers to the
proportional amount of increase, or
decrease, in final income that results from
an injection, or withdrawal, of spending.

MULTIPLIER EFFECT Part 1

EXAMPLE OF THE
MULTIPLIER
FFECT
A job multiplier is a way to measure how important an
industry is to other industries in the regions.

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A job multiplier is a way to measure how important an industry is
to other industries in the regions

1 2
 MULTIPLIE

1
R EFFECT
A job multiplier is a way to
measure how important an
industry is to other industries
in the regions.

MULTIPLIER EFFECT
 SPENDING

2
MULTIPLIE
R
When government increases its spending,
it stimulates aggregate demand, and
causes some real GDP growth. That growth
creates jobs, and more workers earn
income

FISCAL POLICY
SPENDING Part 2
MULTIPLIER
MARGINAL PROPENSITY TO
CONSUME
Marginal Propensity to Consume
is the proportion of an increase in
income that gets spent on
consumption.

MPC
MARGINAL PROPENSITY TO
CONSUME
The multiplier will be higher if
government spending goes to
people with high marginal
propensity to consume

MPC
 OVERSEAS
LEAKAGE
The transfer of domestic
economic stimulus to foreign
markets is known as overseas
leakage.

OVERSEAS LEAKAGE
LIMITATION OF SPENDING
STIMULUS
The first limitation in attempting to use
government spending is inflation. In the
short term, an increase in government spending
raises wages and prices, not actual output.

MPC
An impact of time lags is that the effect
of policy may be more difficult to
quantify because it takes a period of
time to actually occur.

TIME LAGS
TAXATION
A tax cut is a reduction in the rate of tax charged by a
government. The immediate effects of a tax cut are a decrease in
the real income….

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 TAXATION
A tax cut is a reduction in the rate of tax
charged by a government. The immediate
effects of a tax cut are a decrease in the
real income of the government and an
increase in the real income of those whose
tax rates have been lowered.

TAXATION