2. Aggregate demand and output 800 400 160 80 0 AD 1 (G=80) AD 0 (G=0) 45° E1E1 E0E0 400 Y* Income (Y) 800 Unemployment equilibrium Full employment equilibrium Full employment

3. Federal Sources of Funds Federal Outlays Personal income taxes (39%) Social insurance and retirement taxes (32%) Corporate taxes (13%) Borrowing to cover deficit (9%) Excise, estate, and other taxes (6%) Social security, Medicare (32%) National defense, veterans, foreign affairs (23%) Income security, education, social services (17%) Health (9%) Interest on debt (8%) Community development (2%) Justice, government administration (2%) Science, natural resources (6%)

4. Year Percent of GDP

6. Year Outlays Receipts Surplus (+) or deficit (-)

7. Output (Y) Income (Y) Spending (AD) consumption (C) taxes (T) savings (S) imports (IM) intended investment (II) government spending (G) exports (X) Production generates income to households leakages injections

8. Aggregate demand and output AD 1 (decrease in t) AD 0 (original t) 45° E1E1 E0E0 Y0Y0 Income (Y) Y1Y1 Slope = mpc(1  t)