Chapter 10 – Government Spending
10-4 Federal Deficits and the National Debt
CA Standards:
12.3 Students analyze the influence of the federal government on the
American economy.
Objectives:
•  Explain how the federal deficit is related to the federal debt.
•  Relate the impact of the federal debt on the economy.
•  Describe recent attempts to control the federal deficit
Write definition of key terms found on
page 266 Use glossary in textbook
Read pages 266 - 270
Economics: Principles & Practices
Prepare for Open notebook Quiz
—  Key
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Terms
Deficit spending
Federal debt
Trust fund
Gross Domestic Product
Balanced Budget
Entitlement
page 253
1. How do federal deficits lead to the federal
debt?
- The federal government goes into debt to
finance the deficit
2. In what two ways is public debt different
from private debt?
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Public debt does not require repayment
Public debt does not lead to a decrease in
purchasing power
3. What are four important effects of the
federal debt on the economy?
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The distribution of income is altered
There is a transfer of purchasing power
Taxes needed to pay the interest on the debt cut
down on individual incentives.
There are higher interest rates
4. What is a balanced budget?
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A budget with neither a surplus nor a deficit
5. Recently, what three laws were passed to
control the federal deficit?
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Gramm-Rudman-Hollings
Budget Enforcement Act of 1990
Omnibus Budget Reconciliation Act of 1993
6a. What are entitlements?
-  Broad social programs designed to provide
minimum health, nutritional, and income
levels
6b. Why do entitlements pose a problem for
deficit reduction?
-  Entitlements are some of the largest and
fastest growing programs in the federal
budget and that they support millions of
Americans
Be prepared for open
notebook quiz