Posts Tagged ‘Government Expenditures’
Thursday, April 21st, 2011
To dampen aggregate demand in the economy, the federal government can use a budget surplus, with government expenditures less than tax revenues.
The most likely approach to a budget surplus is for the government to curb the growth of (or even reduce) government expenditures. Such curbs on government spending will be especially helpful in slowing inflation if they reduce the need for the government to increase the money supply to finance its expenditures.
*Because interest payments are one of the cost of doing business, some people believe that the way to curb inflation is to reduce interest rates rather than to increase them through a tight-money policy. While lower interest rates would have a slight cost-reducing effect on business, the easy money associated with lower interest rates would more than offset this by increasing the money supply and aggravating the problem of excess demand. In short, reducing interest rates is exactly the reverse of what is needed to combat inflation.
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- The Deflation Scam The media has been going on and on about deflation. Long-term bond prices have also been trending up and long term yields have been dropping, which means that the market thinks there will be long-term deflation. Even the Consumer Price...
- Wall Street Journal's Tips for Surviving this Financial Nightmare Brett Arends from the Wall Street Journal Personal Finance Section wrote a great article titled, "What You Can Do Right Now - Unpredictable Politics make this a tough moment to invest.  Here are some sound strategies for protecting - and still...
Tags: Aggregate Demand, Budget Surplus, Comfort Inn, Curbs, Doing Business, Duct Cleaning, Easy Money, Excess Demand, Fiscal Policy, Government Expenditures, Government Spending, Inflation, Interest Payments, Interest Rates, Money Policy, Money Supply, Power Vac, Tax Revenues, Tight Money, Winnipeg
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Sunday, February 21st, 2010
The use of fiscal policy to stimulate the economy during recessions requires that the government have budget deficits, with government expenditures larger than tax revenues. Where will the necessary money come from to finance such deficits? There are two possible sources of funds to finance budget deficits.
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- Take Control of Your Finances with Budgeting Software As you know, I'm a huge fan of Mint.com (try typing "mint" into my search box and see how many posts come up). I've been meaning to do write about budgeting for awhile, but I got a great reminder this...
- Freeing Up Breathing Room in a Tight Budget If your budget is so tight that you feel like you cannot find room to breathe, then you are probably in need of some way of freeing up your cash so that you can relieve some stress. While you may...
- Will the Fed Push Inflation to Help the Spenders? While driving to work yesterday, I heard an interesting interview on the Fox Business Network. The discussion was focused on what the Fed would be doing in the coming months to address the multitude of economic problems that relate to monetary...
Tags: Budget Deficits, Economy, Edmonton, finance, Fiscal Policy, forex, Government Budget, Government Expenditures, Money, Necessary Money, Recessions, Sources Of Funds, Tax Revenues
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Tuesday, September 8th, 2009
The use of fiscal policy to stimulate the economy during recessions requires that the government have budget deficits, with government expenditures larger than tax revenues. Where will the necessary money come from to finance such deficits? There are two possible sources of funds to finance budget deficits.
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- Personal Finance 101 J Money at Budgets Are Sexy wrote yesterday about why schools teach about the stock market. It got me thinking about my personal finance education. During my senior year of high school, one of the school administrators came into our...
- Best Reads and Impatiently Awaiting Decision on the Big Three Bailout. I'm quite suprised that it's late Sunday night and I haven't seen a breaking news story from Capital Hill saying "Big Three Automakers have secured their bridge loans", bailout loan, or whatever else their lobbyists want to call it. Perhaps...
Tags: Budget Deficits, Economy, finance, Fiscal Policy, Government Budget, Government Expenditures, Necessary Money, Recessions, Sources Of Funds, Tax Revenues
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Friday, August 28th, 2009
As noted above, certain types of government expenditures, such as unemployment insurance and welfare, tend to wise automatically during recessions, as unemployment rises. In addition to this, many of the government’s tax revenues, such as those from income taxes, profits taxes and sales taxes, tend to be depressed by slower economic activity during recessions. With government tax revenues depressed and expenditures rising, there is an automatic tendency for the government’s budget to go into a “deficit” as a recession develops. This budget deficit will then help to counteract the recession automatically, which is why such government expenditures and tax revenues are called “automatic stabilizers”.
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Tags: Automatic Stabilizers, Autotraders, Budget Deficit, currency, Economic Activity, Gmc, Gmc Truck, Government Expenditures, Government Tax, Income Taxes, Insurance, Mediation, Profits, Recession, Recessions, Sales Taxes, Tax Revenues, Tendency, Types Of Government, Unemployment Insurance, Vancouver, Volkswagen, Volkswagen Car, Welfare, Winnipeg
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Wednesday, August 19th, 2009
We have seen how increases in government spending can raise the level of aggregate demand and help to lift the economy out of recession. Traditionally, governments have used public works for this purpose, building roads, bridges, parks and public buildings when the economy was slack and the construction industry was particularly depressed. Some programs to increase government spending, such as public works projects or special relief or temporary job programs, must be planned and set up, which creates delays in their implementation. However, there are other types of government spending, such as unemployment insurance and welfare payments, which tend to rise automatically when the economy slips into recession, thus providing automatic support to the level of aggregate demand.
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- Spendthrift Colleges Getting What They Deserve I read two interesting and ironically related articles in the business section of today's paper. Both articles highlight the lousy jobs that many of our colleges and universities do in managing money and in delivering value to their students. College...
Tags: Aggregate Demand, Bridges, Construction Industry, Economy, Foreign Currency, Government Expenditures, Government Spending, Governments, Honda, Implementation, Insurance, Kijiji, Public Buildings, Public Works Projects, Recession, Resource Center, Temporary Job, Types Of Government, Unemployment Insurance, Vancouver, Welfare Payments
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Sunday, August 16th, 2009
The use of government spending and taxes (the federal budget) to influence the level of aggregate demand and thus the performance of the economy is called “fiscal policy.” To stimulate a sluggish economy with increased aggregate demand, we have seen that the government uses a budget “deficit,” with government expenditures in excess of tax revenues. A natural counterpart of this would be to use a budget “surplus,” with tax revenues greater than government spending, to combat inflation. Since inflation is basically caused by aggregate demand rising faster than output can rise, a budget “surplus” can help to ease inflation by depressing the level of aggregate demand in the economy. This and other anti-inflation policies will be considered in more detail. The third possibility regarding fiscal policy would be a “balanced budget,” in which government expenditures and tax revenues would be equal. Such a budget would be appropriate when neither unemployment nor inflation was considered unacceptably high, as the economy would not benefit from an adjustment to the level of aggregate demand.
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