1. FDR Fiscal Policy Taxes Government Spending GDP Aggregate Demand Aggregate Supply Budgets Keynesian Economics Solving Economic Problems

2. The Economic Conditions of the Great Depression What Caused the Great Depression? What Caused the Great Depression? When did this economic problem occur? When did this economic problem occur? Who was impacted? Who was impacted? Jobs? Jobs? Production? Production? GDP? GDP? Value of the dollar (CPI)? Value of the dollar (CPI)?

3. What Caused the Great Depression?

4. Understanding the Aggregate Demand and Supply Classical economists held that the economy (market system) would automatically adjust during times of war, severe drought, depression, etc. Classical economists held that the economy (market system) would automatically adjust during times of war, severe drought, depression, etc. For example: Economic slump would lead to lower prices; people would begin buying again; and the economy would recover. For example: Economic slump would lead to lower prices; people would begin buying again; and the economy would recover. The Great Depression would test this theory of self-adjustment. The Great Depression would test this theory of self-adjustment.

5. Understanding the Aggregate Demand and Supply Keynesian Economics stood on the principle that government intervention was needed during such severe interruptions in the marketplace. Keynesian Economics stood on the principle that government intervention was needed during such severe interruptions in the marketplace. Without intervention, the economic conditions could worsen, and the market could collapse. Without intervention, the economic conditions could worsen, and the market could collapse. To understand this, we must understand the Aggregate Demand /Supply model. To understand this, we must understand the Aggregate Demand /Supply model.

6. Real GDP Price AD AS A measure of the output of final goods and services. A measure of the price level

7. Real GDP Price AD AS A total of the measure of the output of final goods and services demanded by the American economy A total of final goods and services supplied by the American economy

8. Real GDP Price AD 1 AS AD What happened to Aggregate Demand during the Great Depression? What causes a decrease in AD? Decrease in Consumer Wealth Decrease in Investment Spending Decrease in Consumer Expectations Increase in Household Debt Increased Taxes / Decreased Government Spending

9. Real GDP Price AD 1 AS AD What happened to Aggregate Demand during the Great Depression?

10. Real GDP Price AD 2 AS AD AD 1

11. Expansionary Fiscal Policy Increase Government Spending Increase Government Spending Tax Cuts Tax Cuts Real GDP Price AD 2 AS AD AD 1

12. Contractionary Fiscal Policy Decrease Government Spending Decrease Government Spending Increased Taxes Increased Taxes Real GDP Price AD 2 AS AD AD 1

13. FDR’s Response Increased Government Spending Increased Government Spending The New Deal The New Deal Defense Spending Defense Spending World War II World War II Increases in spending allowed for increased AD. Increases in spending allowed for increased AD. Real GDP Price AD 2 AS AD AD 1