Assume that the United States economy is currently operating at the full- employment level of real gross domestic product with a balanced budget. The
government determines that unemployment is growing in various sectors of the
economy and wants to react before the output is affected. The government increases
government spending and this causes AD to shift to the right.

1. Its called the 50-20 paradox. It took us 50 years to reach annual savings ratings of almost 10 percent.
2. Over the course of the last 20 years, we went from a 10 percent savings rate to a negative savings rate. Because we binged. We bought extra-large cars, supersized everything. All these things together basically created a factor where the consumer drove us into the crisis that we face today. The personal debt-to-income ratio basically went from 65 percent to 135 percent in the span of about 15 years. So consumers got over leveraged.And of course our banks did as well, as did our federal government.