Eco 372 Week 4 Reflection

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Week Four Reflection This is Team A’s reflection on week two objectives. We will discuss this week’s objectives will address topics we feel comfortable with, any topics we struggle with and how the weekly topics relate to application in our fields. The objective for week four is as analysis of the influence of deficit, surplus, and debt on the health of the United States macroeconomy. Deficit is a lack of revenue. Surplus is an excess of revenue. Debt is money owed. The United States government has seen its share of all three throughout its history. The United States maintained deficits in the 1980s and a majority of the 1990s. In 2000 revenues exceeded expenditures, however the government chose to lower taxes and increase spending; opposite of economic theory. This paid off following the 911 attacks making the anticipated recession the shortest to date. The United States deficits are funded by the selling of bonds. If buyers are unwilling to buy these bonds, the central banks buy them. Because these loans are IOUs, they can be offset by printing more money. This gives central banks an unlimited supply of money. Overdoing this will lead to inflation that hurts the economy (Colander, 2010, p. 406). One problem in government accounting is how they classify debt and expenditures. Accounting addresses several ways a business may classify an expenditure and depreciation over time. Government makes their own rules or change existing rules to fit their needs. Structural, passive, nominal, deficits, and surpluses are ways of defining the economy based either on government actions designed to run a deficit, surplus, or other external factors adjusted for inflation or not (Colander, 2010, pp. 407-410). Our text states “Deficits are summary measures of the state of the economy. They are dependent on the accounting procedures used” and “It is the health of
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