Business Cycle, Taxes, Federal Budget, National Debt, Fiscal Policy, Keynesian Economics, Supply-Side Economics, Reaganomics

Business Cycle

The recurring pattern of economic growth and decline

Expansion

Period of economic growth measured by a rise in real GDP

Peak

Highest point between economic expansion and contraction

Contraction

Period of declining real GDP after a peak

Trough

Bottoming process of moving from contraction to recovery

Factors affecting business cycle

Consumer spending, government spending, innovation, technology, global economic conditions, natural disasters, political factors

Types of taxes

Income, sales, property, corporate, excise, payroll, capital gains, inheritance/estate, tariffs

Levels of government taxed by

Federal, state, local

Principles of taxation

Ability to pay principle (progressive) and benefits received principle

Income tax

Tax on individual or entity's income

Property tax

Tax on the value of owned property

Consumption tax

Tax on spending or consumption

Sin tax (excise tax)

Tax on goods or activities considered harmful to society

Other types of federal taxes

Social security, corporate income, estate taxes

IRS

United States government agency responsible for administering and enforcing internal revenue laws

Purposes of taxes

Generate revenue for the government

Government services

Public schools, public safety (police, military)

Benefit from tax dollars

Access to public services like education

Federal Budget approval process

Federal agencies create budget requests, OMB develops budget proposal, president submits proposal to Congress, Congress creates budget resolutions and funding bills, president signs or vetoes bills

Public debt (national debt)

Total amount of money a government owes to external creditors and its citizens

Debt

Total amount of money a government owes to external creditors and its own citizens

Deficit

When a government's expenditures exceed its revenues during a specific period

Surplus

When a government's revenues exceed its expenditures during a specific period

U.S. Federal budget

Includes discretionary spending and mandatory spending

Top spending categories

Defense, social security, medicare, interest on national debt

Impact of big national debt

Allocation of government budget to paying interest, higher interest rates, volatility to economic downturns

Fiscal year

Period used for financial reporting and budgeting, starts on October 1 and ends on September 30

Fiscal policy

Use of government revenue and expenditure to influence the economy

Expansionary fiscal policy

Increasing government spending or reducing taxes to stimulate economic growth

Contractionary fiscal policy

Cutting spending or raising taxes to cool down an overheated economy

Tools of fiscal policy

Government spending and taxation

Responsibility for fiscal policy

Government authorities, executive and legislative branches

Application of fiscal policy

Counter-cyclical approach, expansionary measures during economic downturns and contractionary measures during periods of inflation or excessive growth

Keynesian economics

Advocates for government intervention to manage economic cycles through fiscal measures

Politics and Keynesian economics

Political considerations can influence the timing and magnitude of fiscal measures

Supply-side economics

Emphasizes policies that promote the supply or production side of the economy

Reaganomics

Economic policies implemented during Ronald Reagan's presidency, caused economic growth, job creation, inflation reduction, income inequality

Current state

Expansion state, fiscal policy should be employed by cutting taxes and expanding the economy