Table 10.1 An Increase in Government Spending[1] (1) Income (Y) (2) Consumption (C) (3) Intended Investment (II) (4) Original Aggregate Demand (AD = C + II) (5) Government Spending (G) (6) New Aggregate Demand (AD1 = C + II + G) 300 260 60 320 80 400 340 480 500 420 560 600 640 700 580 720 800 660

Figure 10.1: Increased Government Spending

Federal Sources of Funds, Fiscal 2004 Figure 10.2: U.S. Federal Government Source of Funds and Outlays, 2005 (to be continued) Federal Sources of Funds, Fiscal 2004 Social security, Medicare, unemployment, and retirement taxes, 32% Corporate income taxes, 8% Borrowing to cover deficit, 18% Personal income taxes, 35% Excise, customs, gift, estate, and miscellaneous taxes, 7%

Figure 10.2: U.S. Federal Government Source of Funds and Outlays, 2005 (continued) Figure 10.2: U.S. Federal Government Source of Funds and Outlays, 2005

Figure 10.3: The Government Deficit as a Percentage of GDP Federal Surplus or Deficit as % GDP 1975-2006 -7 -6 -5 -4 -3 -2 -1 1 2 3 1970 1975 1980 1985 1990 1995 2000 2005 2010 Surplus (+) or Deficit (-) Figure 10.3: The Government Deficit as a Percentage of GDP

Figure 10.4: Government Debt Held by the Public as a Percentage of GDP U.S. Federal Debt as % GDP 0.00 0.10 0.20 0.30 0.40 0.50 0.60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Domestically- held debt Foreign-held Debt Figure 10.4: Government Debt Held by the Public as a Percentage of GDP

Figure 10.5 Government outlays, taxes and surplus/deficit as % GDP Federal Receipts, Outlays, and Surplus/Deficit as % GDP 1975-2006 -10 -5 5 10 15 20 25 1970 1975 1980 1985 1990 1995 2000 2005 2010 Receipts Outlays Surplus (+) or Deficit (-) Figure 10.5 Government outlays, taxes and surplus/deficit as % GDP

Figure 10.6: Leakages and Injections in a Complete Macroeconomic Model

Figure 10.7 A Cut in the Proportional Tax Rate