Key Points:

 “creating 3.5 million jobs and boosting consumer spending and rebuilding infrastructure”
 “economy will be saddled with debt”
 “start the flow of federal money toward infrastructure projects, health care, renewable energy
development and conservation programmes”
 “36% for tax breaks and 64% in spending and money for social programmes”
 “this investment will ignite our imagination once more, spurring new discoveries and breakthroughs
in science, in medicine, in energy, to make our economy stronger and our nation more secure”
 ”$240bn in tax breaks for individuals and businesses”
 “$140bn for health care”
 “$100bn for education”
 “$48bn for transportation projects”
 “bill also includes a controversial "Buy American" provision that, despite being watered down, has
angered US trading partners”
 “approved plan stipulates that public works and building projects funded by the stimulus use only
US-made goods, including iron and steel”
 “EU and Canada had earlier said that provisions favouring American-produced materials for
government projects risked provoking retaliatory protectionist measures”

Impact on Aggregate Demand (AD):

“36% for tax breaks and 64% in spending and money for social programmes” - consumer spending,
investments by private firms, and government expenditure will increase. The tax breaks will increase
consumers’ disposable incomes and spending abilities as well as increase private firms’ profitability thus,
increasing consumer expenditure and investments, respectively. Plus, government will be spending on social
programmes, increasing government spending. Thus, Aggregate Demand (AD) will increase and Aggregate
Demand (AD) curve will shift to the right, as seen in the below diagram.

”$240bn in tax breaks for individuals and businesses” - consumer spending and investments by private firms
will increase. The tax breaks will increase consumers’ disposable incomes and spending abilities as well as
increase private firms’ profitability thus, increasing consumer expenditure and investments, respectively.
Thus, Aggregate Demand (AD) will increase and Aggregate Demand (AD) curve will shift to the right, as
seen in the below diagram.

“$140bn for health care” - consumer spending, investments by private firms, and government expenditure
will increase. The government expenditure of $140bn on healthcare will increase efficiency and productivity
of workers as they will take less number of sick days and holidays due to being unwell therefore, boosting
the productivity and efficiency of the firm, decreasing its cost of production and increasing profitability.
Investments by private firms will increase, employing more workers, increasing wages and reducing
unemployment, increasing consumer spending as consumers will have greater disposable incomes and
spending abilities. Plus, government will be spending $140bn on healthcare, increasing government
spending. Thus, Aggregate Demand (AD) will increase and Aggregate Demand (AD) curve will shift to the
right, as seen in the below diagram.

“$100bn for education” - consumer spending, investments by private firms, and government expenditure
will increase. The government expenditure of $100bn on education will increase efficiency and productivity
of workers as they will be highly skilled and trained therefore, boosting the productivity and efficiency of
the firm, decreasing its cost of production and increasing profitability. Investments by private firms will
increase, employing more workers, increasing wages and reducing unemployment, increasing consumer
spending as consumers will have greater disposable incomes and spending abilities. Plus, government will
be spending $100bn on education, increasing government spending. Thus, Aggregate Demand (AD) will
increase and Aggregate Demand (AD) curve will shift to the right, as seen in the below diagram.

“$48bn for transportation projects” - consumer spending, investments by private firms, and government
expenditure will increase. The government expenditure of $48bn on transportation projects will increase
revenue and profitability of construction companies and various other firms and industries connected to the
transportation projects. Investments by private firms will increase, employing more workers, increasing
wages and reducing unemployment, increasing consumer spending as consumers will have greater
disposable incomes and spending abilities. Not only that but new transportation projects will mean better
infrastructure, which will attract MNCs, increasing job opportunities, wages, employment rate, living
standards, spending abilities, and disposable incomes, increasing consumer expenditure. Plus, government
will be spending $48bn on transportation projects, increasing government spending. Thus, Aggregate
Demand (AD) will increase and Aggregate Demand (AD) curve will shift to the right, as seen in the below
diagram.

“approved plan stipulates that public works and building projects funded by the stimulus use only US-made
goods, including iron and steel” - net exports will increase. Protectionism polices will ensure only US-made
good, including iron and steel are used in public works and building projects funded by stimulus package,
increasing consumption of domestic goods and decreasing imports. This will lead to greater net exports.
Thus, Aggregate Demand (AD) will increase and Aggregate Demand (AD) curve will shift to the right, as
seen in the below diagram.