SI Session 2/28/24

Deficit that results from business cycles

• Full employment

• Unemployment

• Cyclical Deficit

• Structural Deficit

C + S + T

• Consumption Function

• Private saving

• Aggregate Expenditure (AE)

• Output (Y)

G < T

• Shortage

• Surplus

Y - T

• Public Saving (T - G)

• Savings (S)

• Income Tax

• Disposable Income (Yd)

T < G

• Surplus

• Defecit

Deficit during full employment

• Structural deficit

• Structural Unemployment

• Surplus

• Never happens

Spending and taxing policies controlled by Congress

• Monetary Policy

• Fiscal Policy

• Set the interest rate

• Ineffective

T - G

• Private Savings

• Tax Multiplier

• Public Savings

• Government Spending

C + I + G

• Consumption function

• Government surplus

• Output (Y)

• Aggregate Expenditure (AE)

Y < AE

• Inventories will decrease

• Inventories will increase