AP ECONOMICS: March 1 --Fiscal Policy Tools; Rescessionary and Inflationary Gap reteach Warm-up If the government decides to spend $500B more on infrastructure and simultaneously raises taxes by $500B, what is the impact on the federal budget? The national debt? The economy? What is the cumulative multiplier in this scenario? Assume the MPC=.75. A.P. Economics Learning Target In order to understand how equilibrium national output and price level are determined, I will analyze the impact of the multiplier effect. I will know I have it when I can: (1) explain how an initial change in spending leads to many additional rounds of spending; (2) calculate the spending and taxation/transfer multipliers; and (3) calculate the amount that the government must change its taxation/transfers or spending to help the economy reach full employment by taking the multiplier effect into account. --conclude discussing Worksheet 21.1 (HO from earlier) Reminders --the spending multiplier applies to ALL changes in spending (not just G, but C, Ig, and Xn as well) --fiscal policy is DEMAND-SIDE POLICY (don’t shift the AS or LRAS curves) Assignment Make sure you have completed all of your Unit 3 GC assignments --Worksheet 21.2 (HO from earlier—back of Worksheet 21.1) Wednesday: FRQ #5 (mainly over Key Concepts HO) Thursday: MCT #3 Friday March 8th: Notebook turn in