1. WARM-UP
First, explain the difference between the supply curve
and the aggregate supply curve. Second, draw and label an
aggregate supply curve.

2. Chapter 15 Section 2

3. Demand-Side Policies
Medicare
Federal health care program for senior citizens, regardless of
income
Fiscal Policy
Use of Government spending and revenue collection
measures to influence the economy
Derived from Keynesian Economics
Government spending and taxation policies
suggested by John Maynard Keynes to stimulate the economy

4. Keynesian Economics
Output-Expenditure Model:
GDP=C+I+G+F
F= Foreign Sector
G= Government Sector
C= Consumer Sector
I= Investment (Business) Sector
Multiplier
Magnified change in overall
spending caused by a change in investment
spending
Accelerator
Change in investment spending
caused by a change in overall spending

5. Role of Government
Indirect role by lowering taxes
Big enough to offset changes in investment-sector
spending
Automatic Stabilizers
Automatic Stabilizers
Program that automatically provides benefits
to offset a change in people’s incomes
Entitlements
Broad social program that uses established
eligibility requirements to provide health, nutritional, or
income supplements to individuals
Unemployment Insurance
Government program providing payments to
unemployed workers

7. Supply-Side Policies
Supply-Side Policies
Economic Policies designed to
stimulate the economy by increasing production
Same goal as demand side policies
Smaller Role for Government
Reduces the role of the government 3 ways
Deregulation
Relaxation or removal of
government regulations on business activities
Lower Federal Taxes
Laffer Curve
Hypothetical relationship between
federal income tax rates and tax revenues
Limitations of Supply-Side Policies
Difficult to predict

8. Monetary Policies
Monetarism
School of thought stressing the importance
of stable monetary growth to control inflation and
stimulate long-term economic growth
Short Run Impacts
Contractionary Monetary Policy
Expansionary Policy
Long Run Impacts
Future Inflation
Wage-Price Controls
Policies and regulations making it
illegal for firms to give raises or raise prices
without government permission
Use of Monetary Policy
Gradual