How many of the following are NOT public goods/services

provided by the government?

THE GOVERNMENT AND THE ECONOMY

SOL CE: 11bc

The student will demonstrate knowledge of the U.S. economy by explaining how and why public goods/services are created and the

effects of government spending, borrowing, and taxing.

THE THREE CHARACTERISTICS OF PUBLIC GOODS AND SERVICES:

1) Public goods/services provide benefits to many simultaneously.

2) They are provided by the government because individuals acting alone could not provide them as efficiently.

3) Therefore, they wouldn’t be available if we had to provide them ourselves.

The government produces public goods and services by…

• using tax revenue from individuals and businesses to pay for them.

• They also borrow funds from other countries.

• The 16th Amendment authorizes Congress to tax personal & business incomes.

The effects of government taxing, borrowing, and spending:

TAXING LESS:• When the government decreases taxes, it

increases the funds for private and business spending.

↓ TAX = ↑ MONEY TO SPEND

TAXING MORE:• When the government increases taxes, it

decreases the funds for private and business spending.

↑ TAX = ↓ MONEY TO SPEND

BORROWING MORE:• When the government increases the amount

it borrows, it decreases the funds available for borrowing by individuals and businesses.

↑ GOVERNMENT BORROWING =

↓ BORROWING FOR US

BORROWING LESS:• When the government decreases the amount

it borrows, it increases the funds available for borrowing by individuals and businesses.

↓ GOVERNMENT BORROWING =

↑ BORROWING FOR US

SPENDING MORE:• Increased government spending increases

demand, which may increase production, employment, and taxes.

↑ GOVERNMENT SPENDING =

↑ DEMAND, ↑ PRODUCTION,

↑ EMPLOYMENT, AND ↑ TAXES

SPENDING LESS:• Decreased government spending decreases

demand, which may decrease production, employment, and taxes.

↓ GOVERNMENT SPENDING =

↓ DEMAND, ↓ PRODUCTION,

↓ EMPLOYMENT, AND ↓ TAXES

TRUE and FALSE

Results: