READING: Chapter 13 - Fiscal Policy | Top Hat

Figure 13.2 lists a number of tax and spending changes that have occurred in the United States over the past 60 years. Why did they happen? After all, wouldn’t we expect national leaders to arrive at an economically viable tax structure and stick with it? The quotes at the beginning of this chapter illustrate the fact that fiscal policy is one of the most contentious issues facing governments in advanced economies. In this chapter, we will explore the economics and politics of these contentious and constantly changing fiscal policies. After completing this chapter, answering the questions, and doing the problems, you should be able to: ​Government spending is financed through taxes and borrowing. If government spending exceeds tax revenue, the government is running a deficit and must borrow to cover the shortfall. If tax revenue exceeds spending, there is a government budget surplus. With the exception of a few years during the Clinton Administration in the late 1990s, the U.S. federal

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