 So, now we're going to use our income expenditure model to show how a recession affects income and output through the multiplier, and then how the government can come in and spend money and help get the economy out of a recession. Now remember that aggregate expenditure, planned aggregate expenditure in our model so far is equal to consumption plus planned investment. But now we want to add another very important component and that is government expenditure G. Government expenditure is government expenditure on aircraft carrier, bombs, schools, both at the state and local level and at the federal level. Now Keynes' major insight is that in a very serious recession the economy might settle down at a very low level of income and employment. And to get the economy out of the recession the government might have to step in and spend money. It's better if it spends money doing useful things like building schools, but the major thing the government has to do is spend money, start employing workers, they'll spend money and through the multiplier process they will start buying things from other firms and that will create more jobs. So let's see how this works in this model. Let's say the economy starts off at a high level of planned expenditure, then because of some financial crisis or some other big event there's a big decline in planned expenditure from the black line all the way down to the green line. When that happens through the multiplier process income falls and Keynes said it will just stay at this lower level Y prime unless something is done. And what can the government do? The government can come in, spend money, hire workers who then will create more jobs throughout the economy and we can represent that by a movement up in the planned spending curve. And what will happen is if the government spends more money then the economy will expand and that's fiscal policy to generate more employment. Voila.