Warm-Up

Answer the following questions:

What are fiscal policies?

Where are they derived from?

What is the output-expenditure model? (include labels)

Economics and PoliticsChapter 15 Section 3

Changing Nature of Economic Policy

The government can influence the economy with

discretionary, passive, or structural fiscal policy

Types of Fiscal Policy

3 Types

1. Discretionary

-Policy that someone must choose

to implement

-Requires an action by

congress, the President, or another

government agency

2. Passive

-Does not require new or special

actions to go into affect

-Reacts automatically when the

economy changes

3. Structural

-Policies designed to strengthen

the economy over a longer period

of time

Decline of Discretionary Fiscal Policy

Reasons

1. Relates to the various lags that inevitably

occur between recognizing that there is a

problem and actually doing something about it

2. Gridlock that can occur when the political

parties in congress oppose each other’s views

on the budget

3. Ideology

Rise of the Monetary Policy

Monetary Policy

-Actions by the Federal Reserve System to

expand or contract the money supply in order

to affect the cost and availability of credit

Economics and Politics Today

Economic Politics

-Politicians are concerned largely with the economic

consequences of what they do

Why Economists Differ

-Economists choose one policy to support over

another because they feel some problems are more

critical than others

-Most economic theories are a product of the times

Baby Boomers

-People born in the United States

during the historically high

birthrate years from 1946 to 1964

Council of Economic Advisors

Council of Economic Advisors

-Three member group that devises

strategies and advises the President of the

United States on economic matters

Increased Public Understanding

The Economy and Baby Boomers

http://www.youtube.com/watch?v=L4Xc7_Aq0Yg