Economics-Ippolito-2016 Name: ______

Government Unit Study Guide

This study guide is mandatory for all students Due Wednesday March 30th

FORMAT: Multiple Choice & Free Response: Test will cover all lectures, handouts, current events and textbook reading. My website will be very useful in studying. This test will have many graphs on both sections of the test. (Know AD/SRAS & LRAS graph and the graph for loanable funds )

1)  Total Government spending is $3.65 trillion for 2014. A government deficit is when the Gov’t spends more than it collects in ______. A government debt is the sum of all the deficits.

2)  List both the dollar size of the current U.S. Government debt and deficit as well as the % of GDP numbers.

(from your budget grid)

U.S. Debt = $______% of GDP = ______U.S. Deficit = $______% of GDP = ______

U.S. GDP = $18.3 Trillion

3)  List the 4 largest spending categories of Government Budget by percentage of the total budget.

  1. See budget handout for numbers

______

______

4)  What are Entitlement Programs and why are they increasing so rapidly in the future in terms of the Government Budget.

·  List the 3 main programs, % of Budget, reasons for growth, etc…

______

______

5)  List the 2-Types of Gov’t Deficits and the characteristics of each one. (know when they occur in the business cycle)

______

6)  Which type of deficit does the USA primarily have today and why is this so problematic? (know this!)

______

7)  How does the Federal Government raise money for deficit spending: ______

8)  If Government debt grows too quickly, economists believes crowding out will occur. Explain the theory of crowding out and who exactly is “crowded out” of the loanable funds market.

______

9)  Has crowding out has occurred in our economy yet? ( Yes, No) How do you know? ______

USA PPF Curve

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10)  Draw an economy using the AD/AS MODEL in a recessionary gap & inflationary gap (draw AD, SRAS & LRAS)

Recessionary Gap Inflationary Gap

11)  AD = ______(hint think GDP) AS = ______

12)  LRAS = ______(hint: how is it related to the PPF curve)

13)  If the PPF curve shifts to the right, then the LRAS shifts ______

14)  List the 2-Types of FISCAL Policy the Federal Government can use to “smooth” out the business cycle:

______

15)  The risk of expansionary fiscal policy is ______government debt which could lead to

______(think loanable funds market)

16)  Briefly Summarize how each of the following economic theories would approach a recession:

  1. Classical Economists- ______
  1. Keynesian Economists - ______
  1. Supply-Side Economists ______

17)  Innovation in this country has many benefits. Innovation shifts the PPF curve to the ______which then, in turn, which shift which curve in the AS/AD model to the right: ______

18)  When LRAS shifts right real GDP ______and the price level ______

19)  List and define the 4-types of unemployment

______

______

Which 2 concern the U.S. Government: ______

20)  Explain what the term full unemployment means to an economist.

·  What economic problem can occur when the unemployment rate falls lower than this level?

______

______

21)  Define the 3-types of taxes in the US and provide an example of each Example

Progressive Tax ______

Regressive Tax ______

Flat Tax ______

Free Response Format: You will have to analyze the U.S. Government Budget and economic policies using the AS/AD Model & the Loanable Funds Graph.

1) Analyze your policy over the short and long run and state the opportunity costs/benefits of your approach!

2) Understand how different economic theories would approach fixing a recession. (Keynesian, Classical & Supply Side)

TOTAL SCORE ______/30 PTS

Excellent Work ____ Very Good Work ___ Good Work ____ Poor Work ____