AP Economics

Mr. Bernstein

Module 20: Fiscal Policy: The Basics

(p 202-204 and p 499)

October 2015

2

AP EconomicsMr. Bernstein

Expanded Circular Flow Diagram

3

AP EconomicsMr. Bernstein

Governments and their economies

4

AP EconomicsMr. Bernstein

Fiscal Policy• Taxes, USA, 2008

5

AP EconomicsMr. Bernstein

Fiscal Policy• Government Spending

6

AP EconomicsMr. Bernstein

Fairness and Taxation – what is a “Fair Share”?• Proportional Tax - one rate, regardless of income

level• No tax breaks for charity, home mortgage, etc.• Popularly labeled “Flat Tax”

• Progressive Tax – rates are higher for higher earners

• Regressive Tax – rates are higher for lower earners