Foundations of Economics, 8th Edition

32.1 The Federal Budget

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The federal budget is an annual statement of the tax revenues, outlays, and surplus or deficit of the government of the United States, together with the laws and regulations that authorize these revenues and outlays.

The federal budget has two purposes: to finance the activities of the federal government and to achieve macroeconomic objectives. The first purpose of the federal budget was its only purpose before the Great Depression years of the 1930s. The second purpose evolved as a response to the Great Depression and was initially based on the ideas of Keynesian macroeconomics (described in Chapter 24 previous page). Fiscal policy is the use of the federal budget to achieve the macro-economic ...