AP WEEK 10 PRACTICE SHIFTING ADAS GRAPHS AND NOTING THE CHANGES, CLASSICAL AND KEYNSIAN THEORY INTRODUCE FISCAL POLICY MONEY MULTIPLIER

MONDAY Open house tonight OBJECTIVE: BE ABLE TO DRAW 4 ADAS AT EQUILIBRIUM, LABEL THEM PROPERLY AND THEN SHOW THE SHIFTS FOR CHANGES TO AD AND AS. BE ABLE TO EXPLAIN WHAT HAPPENS TO BRING IT BACK TO FE. YOU WILL CREATE THE 4 GRAPHS AND WALK THROUGH THE CLASSICAL THEORY OF WHAT HAPPENS TO BRING THE ECONOMY BACK TO EQUILIBRIUM. Do now: Look at your notes: do you have contractionary and recessionary gap in them. Write beside them what side the equilibrium is to LRAS. Write the terms: sticky wages and Ratchet Effect EQ: What are the components of the ADAS GRAPH?

Classical theory is that the economy will always come back to full equilibrium, without any government involvement. However, it takes time. On a light colored piece of paper, fold in 4 equal parts, number them 1-4. Draw 1 ADAS at full equilibrium in each square and label it. Read the scenario and make the shifts. 1 shift at a time. Label each equilibrium. Start with A at full and so on. Bring to the axis and label change in PL and Output. Then fill in the sheet with what happens at each step.

#1 Increase the AD (C+I+G+XN) We will model in class #1 Increase the AD (C+I+G+XN) We will model in class. You and your partner will do the other 3. What happens to PL? What happens to GDP/Output? As a result of this, what happens to real wages? Workers will then demand what? As suppliers are faced with this new worker demand, what happens to suppliers input cost? What now happens to SRAS? GDP will now do what? ___________ but the PL will ______

Tuesday- MAKE SURE YOU HAVE READ MODULE 20 BY TOMORROW Objective: Be able to explain the difference between the Classical and Keynesian Theories. Be able to write notes from video clip, listen carefully to what both sides thank. Vocabulary, Spirit Animals, Bulls and Bears, Keynes, Hayak, Fiscal and Monetary policy. Do Now: Review your graphs from yesterday. These were a result of the Classical Theory. EQ: When did Keynes theories begin? What are two tools used?

Watch clip with biographers for both defending each philosopy Watch the video on the debate between Hayak and Keynes Discuss What is the role of free trade? Government? Copy short summary of the Classical, Neo-Classical, Keynesian, Neo-Keynesian And Monetary, Central Bank, Federal Reserve in US.

Wednesday HOMEWORK- READ MODULE 21 Objective: You will be able to describe and show on graphs what happens with the shocks to AD and to SRAS. You will be able to explain. You will be able to state different sources of taxes and spending that the government has. Be able to state in which instances does the government use expansionary or contractionary. Objective: You will read charts, and draw the graphs to show recessionary and inflationary gaps then show what fiscal policy to use to bring back to FE. Do Now: Recall from your notes what the quote, “in the long run we will all be dead” means and who said it. Vocabulary: Stabilization policy, expansionary fiscal policy, contractionary fiscal policy EQ: What are the 2 different methods used to bring the economy back to full equilibrium?

Use graphs204 and 205 White boards to draw the graphs Take down the notes, Gallery walk to see the shifts Practice questions for exit

Thursday: Module 21 Open with spending activity ( materials needed, 20 cards with $2.00. 8 product cards even numbers $18.- $2. Objective: you will be able to explain what the spending multiplier is and how it influences the government policy. You will be able to calculate the formula. Explain the Tax Multiplier. You will watch ACDC Macro 3.10 and calculate the practice examples that he provides. Voc. Spending multiplier, Tax Multiplier, Balanced budget multiplier, lump-sum taxes, marginal propensity to spend, marginal propensity to save, autonomous change in aggregate spending, consumption function, autonomous consumer spending, automatic stabilizers, discretionary fiscal policy Do Now: Look over your vocabulary terms from your reading. Quiz your shoulder partner over them. EQ: What does the spending multiplier do? How does the government use this to close the gaps? LAST DAY TO MAKE TEST CORRECTIONS

Things to recall CFM- every dollar spent is the income to someone else MPC +MPS=1 always MPC= change in consumer spending/change in disposable income The total increase in RGDP that results from each $1.00 of initial spending M= 1/(1-MPC) or since 1-MPC = MPS you can say M=1/MPS You may have to get MPS. Businesses invest when they expect future RGDP to increase- they must start early for things like factories. If they are already producing more than they can sell they will not want to increase output. Bottom line is Total revenue-total cost/investment cost. Businesses will invest when the rate of return is greater than the cost of borrowing the funds.

What would happen to inventories during contractionary period What would happen to inventories during contractionary period? Expansionary? Where do these two periods show on the business cycle- draw one and label.

Tax multiplier = -MPC/(1-MPC) Or you can say –MPC/MPS Tax multiplier is negative ----- WHEN USING TAXES THE SPENDING MULTIPLIER WILL ALWAYS BE LESS SOME FISCAL POLICIES REQUIRE LEGISLATION – DISCRATIONARY FISCAL POLICY AND SOME ARE AUTOMATIC-

COMPLETE PRACTICE ON THE HANDOUT

FRIDAY- NO MORE CORRECTIONS ON UNIT 3 TEST OBJECTIVE: TO REVIEW QUESTIONS FROM PRIOR TEST TO PRACTICE THEM. YOU WILL READ THE QUESTIONS IN SMALL GROUPS. USING THE CARDS WITH A QUESTION ON THEM, READ THE QUESTION AN DISCUSS IT WITH THE TEAM. DRAW GRAPHS IF NEEDED, CALCULATE THE ANSWER AS NEEDED. VOC- REVIEW TERMS AS YOU NEED TO IN YOUR NOTEBOOK, ANY WORDS YOU ARE NOT FAMILIAR WITH MAKE NOTE OF THEM IN YOUR NOTEBOOK. Do now: get into groups of 4, get out your formulas and notebooks EQ: Which questions are you still unsure of?