When you finish this chapter, you should: Define the key terms of economics and opportunity cost and understand how a production possibilities frontier exemplifies the trade-offs that exist in life, distinguish between increasing and constant opportunity cost and understand why each might happen in the real world, analyze an argument by thinking economically, while recognizing and avoiding logical traps. | Lecture Issues in economics today - Chapter 10 Chapter 10 Federal Deficits Surpluses and the National Debt McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. 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 McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. 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 McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. 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. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. 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 McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. 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 McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. B i l i o n 1 9 9 2 D o l a rs Real Deficit Surplus Real Deficit Sur Total and Off Budget .
