Devise a functional finance approach to budget deficits
1) Try your hand at balancing the federal budget by using Nathan Newman’s National Budget Simulation (created at UC Berkeley)
a. Develop a budget and see what happens. Were you successful in balancing the budget? If not, how much of a deficit or surplus did you end up with? What does this exercise tell you about the process of creating a balanced budget?
b. Reexamine the budget cuts or increases you made. What problems would such changes pose for a politician facing reelection?
2) Please go to the Web site for the Bureau of the Public Debt. The site contains information on the current public debt of the United States, holders of the debt, and historical information. What is the current value of the national debt? How has this changed over the past year?
3) (Budget Philosophies) The functional finance approach to budget deficits would set the federal budget to promote an economy operating at potential output. What problems would you expect if the country were to employ this kind of budgetary philosophy?
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