Econ 1720 Spring 19
H: Output > Aggregate expenditures
E: E point is equilibrium, where output or national income and aggregate expenditure are equal.
Q3. What happens when an economy is at point H? (Meaning what is the
future direction of the economy.)
If output was above the equilibrium level, at H, then the real output is greater than the aggregate
expenditure in the economy. This pattern cannot hold in the long term because it would mean
that goods are produced but piling up unsold.
Q4. In 2008 our economy had a significant downturn. In the assignment
folder is a link to President Obama’s Recovery Act which is a summary of
President Obama's 2010 budget. List up to five different programs that are
proposed. How would you characterize the budget from the perspective of
the concepts covered in chapters 26 and 27?
Use the link in the assignment folder titled, “recovery_act_overview.pdf.”
(You need to be logged in to the online platform and in the assignment folder
to find the link.)
• Create or save 3.5 million jobs over the next two years.
• Provide nearly 40 percent of the package in direct relief to working and middle class families.
• Double renewable energy generating capacity over three years.
• Invest $29 billion in a Clean Energy Finance Authority and Renewable Tax Credits that
together will leverage an additional $100 billion in private investment in the renewables sector.
• Make a $150 billion investment in our nation’s infrastructure – the largest investment since the
interstate highway system in the 1950s.
Q5. Considering what you know about the economy in 2008, and 2009 and
using exhibit 27-16, what was President Obama trying to do? (Your answer
should include if he is addressing an inflationary gap or a recessionary gap
and using contractionary or expansionary fiscal policy.)
The American Recovery and Reinvestment Plan is designed not only to
jumpstart our economy and create jobs, but to lay the foundation for a more
competitive 21st century economy. Through investments in clean energy,
health care, education and other areas, the plan will address longignored
national priorities and while making a down payment on our nation’s
economic future. He is addressing an expansionary fiscal policy.
