Chapter 7: Economic and Budgetary Policy
Exercises
1. Evaluating Economic Data
Chapter 7 reviews a variety of economic goals that the U.S. government attempts to promote, such as low levels of unemployment and strong economic growth. In this exercise, you will examine government data on some of the indicators used to evaluate these goals and study recent trends.
Go to the Economic Statistics Briefing Room, which is part of the White House Web site. Click on "Employment." Note that you can access information on unemployment in a number of ways. Focus on the unemployment rate, which is the percentage of the population currently out of work.
- What is the current unemployment rate?
- Select the "Unemployment Rate Chart" link. This takes you to another site outside of the Briefing Room. The chart provides historical data for the U.S. unemployment rate. During which year was unemployment the highest? The lowest? Looking at the last five years, is the trend in unemployment increasing or decreasing? Explain.
Return to the Briefing Room and select "Output." Examine the data on economic growth. Find the "Gross Domestic Product" (GDP) data on this page.
- What is the current quarter's GDP? Has it increased or decreased from the previous quarter's GDP?
- Select the Gross Domestic Product Chart, which shows the percentage change in GDP by quarter over the past several years. Do any quarters show a negative percentage change? If so, what might this mean? Which quarter showed the largest percentage change? What is the trend of GDP over the past four quarters?
Return to the Briefing Room site and select "Prices." Examine the inflation data using the Consumer Price Index (CPI).
- What is the current month's CPI?
- Select the "Consumer Price Index Chart," which shows the CPI over the past ten years with data points for each month of each year. Which year had the smallest CPI? The highest? What is the trend in the inflation rate over the past year? You may wish to use the table of data below the chart to find this information
2. Budget Deficit Simulation
During the early 1990s, when the United States had large budget deficits, this simulation was created for those interested in learning more about how to balance a budget. Now that deficits have returned, it is once again relevant to reintroduce students to the idea of deficits and give them the opportunity to make their own choices in regard to how best to eliminate them.
Go to National Budget Simulation. Read the front page to get a sense of what this site is about. Click on the link for the "Short Version" of the game. (For an extra challenge, feel free to use the "Long Version," which provides more specific expenditure categories.)
- You are presented with a number of decisions about what you wish to do with expenditures and taxes. The drop-down menus on the left allow you to increase, decrease, or eliminate certain expenditure categories. Enter your decisions in the drop-down boxes. When you have finished, go to the bottom of the page and "find out what the budget is" to see a comparison between the old budget and the one you just developed.
- Now create a position paper that explains the changes you made and why. What was the result of your decisions? Did the deficit change in any way? By how much? Do you have a better sense of what would need to be done to balance the budget? Discuss.