1. The 2008 Bailout and Fiscal Policy

2. Remember Business Cycles – We were in recession 07 --08 --09--10

3. Why do we need a bailout? Businesses were failing due to stock market crash – Mostly bulky large businesses which were wrapped up in the stock market with options, derivatives, futures, etc. Entire industries and countries were collapsing – GDP declining

5. Too big to fail? The government determined that some companies were too big to fail – General Motors – Ford Motors – Chrysler – Bank of America – Merrill Lynch – AIG What makes a company too big to fail?

6. Fiscal Policy Fiscal policy is the government expenditure and revenue collection to influence the economy – Expansionary Government spends more than it has to boost the economy – Put money in people’s pockets – Contractionary Government increases taxes to slow down the economy – Take money out of people’s pockets

7. Fiscal Policy ContractionaryExpansionary

8. Aggregate Supply/Demand The United States Aggregate refers to the entire economy instead of one sector – Instead of supply and demand for pumpkins, this is overall supply and demand GDP

9. How expansionary fiscal policy affects Agg D and S By pursuing expansionary fiscal policy, the government can boost demand Giving people money is increasing their income – Remember that income is a determinant of demand GDP AD’

10. How expansionary fiscal policy affects Agg D and S Expansionary fiscal policy has 2 effects: – 1. Increases output/GDP – 2. Increases prices This is called inflation GDP AD’

11. Mr. Garcia

12. RULES!!!!!

13. This Week Monday – Tuesday – Bailout Wed – Fiscal Policy Thurs. – Book Work Friday – Articles Monday – Review of Cycles and Fiscal Policy/Quiz Tuesday – Monetary Policy Activity Wednesday – Monetary Policy