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Grade 9-12

AP Macroeconomics – The Deficit and the Debt

Updated: January 4 2017,
Author: Margaret Ray

This lesson supports the Inflation, Unemployment, and Stabilization Policies section of the Advanced Placement Macroeconomics course. It introduces government budget deficits and the national debt and analyzes the long-run effects of budget deficits on the economy.

This lesson appears as Lesson 3, Unit 5: Inflation, Unemployment, and Stabilization Policies in CEE’s Advanced Placement Macroeconomics (4th Edition).


This lesson from Advanced Placement Macroeconomics (4th Edition) reviews the two primary tools of discretionary fiscal policy: government spending (G) and taxes (T). Students learn that the government's budget is balanced when G=T, is moving toward a deficit when G>T and is moving toward a surplus when G<T. Students show the effect of government deficits and surpluses by creating a graph of the Loanable Funds Market.

Bell Ringer: Show students the current value of the national debt (found at, for example), and ask them what they think the number represents.

Learning Objectives

  • Define budget deficit, budget surplus, and debt.
  • Understand the long-run effects of government borrowing.
  • Explain what it means to monetize the debt and how this affects the economy.

Resource List


Please refer to The Deficit and the Debt, Teacher Lesson.


Not available for this lesson.

Extension Activity

Not available for this lesson.


Please refer to The Deficit and the Debt, Student Resource Manual

AP/IB Economics