After studying this chapter you will be able to understand: Give the names and summarize the main characteristics of the four basic market models, list the conditions required for purely competitive markets, convey how purely competitive firms maximize profits or minimize losses in the short run, explain why a competitive firm’s marginal cost curve is the same as its supply curve. | Chapter 10 Federal Deficits, Surpluses, and the National Debt Chapter Outline Surpluses, Deficits, and the Debt: Definition and History How Economists See the Debt Who Owns the Debt A Balanced Budget Amendment Projections of the Future Surpluses, Deficits, and the Debt: Definitions Budget Deficit: the amount by which expenditures exceed revenues Budget Surplus: the amount by which revenues exceed expenditures National Debt: the total amount owed by the federal government Off vs. On Budget Off-budget: parts of the budget designated by Congress as separate from the normal budget. Programs that operate with their own revenue sources and have trust funds; Social Security, Medicare, and the Post Office are examples. On-budget: parts of the budget that rely entirely or mostly on general revenue. History of Deficits, Surpluses, and the National Debt Revolutionary War debt $75 million Closest budget to balance (no deficit or surplus) was $3800 in 1835 There were more years of surplus than . | Chapter 10 Federal Deficits, Surpluses, and the National Debt Chapter Outline Surpluses, Deficits, and the Debt: Definition and History How Economists See the Debt Who Owns the Debt A Balanced Budget Amendment Projections of the Future Surpluses, Deficits, and the Debt: Definitions Budget Deficit: the amount by which expenditures exceed revenues Budget Surplus: the amount by which revenues exceed expenditures National Debt: the total amount owed by the federal government Off vs. On Budget Off-budget: parts of the budget designated by Congress as separate from the normal budget. Programs that operate with their own revenue sources and have trust funds; Social Security, Medicare, and the Post Office are examples. On-budget: parts of the budget that rely entirely or mostly on general revenue. History of Deficits, Surpluses, and the National Debt Revolutionary War debt $75 million Closest budget to balance (no deficit or surplus) was $3800 in 1835 There were more years of surplus than deficit between 1791 and 1836 resulting in a national debt of only $37,000 Civil War debt reached $2 billion From 1865 to 1930 the debt reached $50 billion By 1946 (the end of WWII) the debt was $250 billion By 2000 the debt was $ trillion Accounting for Inflation All figures for deficits, surpluses, and the national debt must be adjusted for inflation. The Real Deficit or Real Surplus measures the deficit or surplus in constant dollars Real Deficit/Surplus Debt and the Ability to Pay It Economists insist that the absolute magnitude of the debt is less important than a nation’s ability to pay it. The measure that does this is the Deficit/GDP ratio Deficit/GDP Surpluses of the late 1990s Surpluses were generated over the late 1990s as a result of High GDP growth that resulted in high tax revenues Peace Dividend: money that was freed up for other spending priorities when the Cold War was over Rapid increases in capital gains tax revenue from a booming stock market How Economists See the
