1. 2 nd Seating Chart (Front of Class) RachaelScottShelby Smith Paperw. HannahZach P.Heather Zach S. Bathroom JoshuaDavidWilliamJuhiAmanda Attendanc Shelby Stephens EmilyGarrett Boss AddieDanielle windowwindow

2. Seating Chart 4th (Front of Class) RachaelSierra Attndnc. SarahCoraCharlesKristen Brandon Bathroom RyanAnmolKyleJordanWill Boss Andrew CierraDylanCourtney J. MaciHunterGabrielleAlex H. Tanner Paperw. HannahAlex B.EmmaCody G. BrettAdamCliffMichael D. NicoleDanielle J.Cody J.Michael E. windowwindow

3. (MPC/Multipliers Handout) HW

4. This Week’s Reading Assignments/HW Today-M17, 21 MPC/MPS/Multipliers Wed-M18 Aggregate Demand Thurs-M19 Aggregate Supply Fri-M20 Macroeconomic Equilibrium Mon-Review/Finish M20/FRQ Practice Tues-Section 4 Test HW: pg. 217 #4,7,13a-c Due FRIDAY

5. MPC, MPS, and multipliers Module 16

6. Be ready for a formula quiz. (tomorrow) GDP (2) Inflation (2) Unemployment (2) Real, Nominal, Inflation (3)

7. The Consumption Function/Schedule (a new graph)

8. MPC, MPS slope of the consumption function

9. autonomous consumption/spending

10. Also: wealth is different from income move along vs. shifts

11. Add “interest rates” to consumption function shifters.

12. Add “inflation expectations” to consumption function shifters.

13. Answer questions on paper when instructed. Move along, shift up, or shift down? #1 I expect a raise three months from now. #2 Stock market crash reduces value of investor portfolios. #3 Joe inherits $1 million. #4 Sally takes a pay cut. #5 Antoine gets a second job. Paper Assignment

14. Move along, shift up, or shift down? #1 I expect to lose my job next month. #2 Stock market crash reduces value of investor portfolios. #3 People expect falling prices next month. #4 Sally gets a pay raise. #5 Interest rates fall. Consumption Function

15. Calculate MPS MPC #6) 0.99 #7) 0.95 #8) 0.90 #9) 0.80 #10) 0.75 #11) 0.66 #12) 0.5

16. Calculate MPC MPS #6) 0.5 #7) 0.33 #8) 0.25 #9) 0.2 #10) 0.1 #11) 0.05 #12) 0.01

17. Calculate MPC AND MPS #13 Jimmy gets a $1,000 raise, and his spending increases by $650. #14 Sara’s income goes from $4,000 to $4,500, and her spending goes from $1,000 to $1,250. #15 Josh’ income rose from $9,000 to $11,000, and his saving went from $1,000 to $1,500. #16 Celia’s income rose from $500 to $750, and her spending went from $450 to $650. Paper Assignment

18. Calculate MPC AND MPS ***(MPC first) #13 Jimmy gets a $2,000 raise, and his spending increases by $800. #14 Sara’s income goes from $3,000 to $4,500, and her spending goes from $1,000 to $1,750. #15 Josh’ income rose from $8,000 to $11,000, and his saving went from $1,000 to $2,000. #16 Celia’s income rose from $500 to $900, and her spending went from $400 to $700. Paper Assignment

19. “Marginal” NOT “Average”

20. Total income: $1,000 Total spending: $800 Average Propensity to Consume: ?? Average Propensity to Save:?? Let’s say autonomous consumption is $500. What’s this person’s MPC??

21. Total income: $400 Total spending: $300 Average Propensity to Consume: ?? Average Propensity to Save:?? Let’s say autonomous consumption is $200. What’s this person’s MPC??

22. Total income: $300 Total spending: $200 17) Average Propensity to Consume: ?? 18) Average Propensity to Save:?? Let’s say autonomous consumption is $150. 19) What’s this person’s MPC??

23. Total income: $2,000 Total spending: $1,800 20) Average Propensity to Consume: ?? 21) Average Propensity to Save:?? Let’s say autonomous consumption is $1500. 22) What’s this person’s MPC??

24. If consumption increases by $10 billion at each level of disposable income… a. change, but the average propensity to consume will not change b. change, and the average propensity to consume will change c. not change, but the average propensity to consume will change d. not change, and the average propensity to consume will not change

25. If consumption increases by $10 billion at each level of disposable income, the marginal propensity to consume will: a. change, but the average propensity to consume will not change b. change, and the average propensity to consume will change c. not change, but the average propensity to consume will change d. not change, and the average propensity to consume will not change

26. If consumption increases by $10 billion at each level of disposable income, the marginal propensity to consume will: a. change, but the average propensity to consume will not change b. change, and the average propensity to consume will change c. not change, but the average propensity to consume will change d. not change, and the average propensity to consume will not change

27. If disposable income was $30 billion, and consumption was $15 billion… APC: If consumption increased $10 billion, that would be $25 billion total, which would make the APC:

28. Multiplier Relay

31. Spending Increase: $50 MPC: 0.8

32. Spending Increase: $50 MPC: 0.8 What if MPC was 0.9?

33. Tax Cut: $50 MPC: 0.8

34. Which has the biggest effect??

35. Multiplier Formulas

36. Calculate Gov’t Spending Multiplier #17-22 MPC 0.95 0.90 0.80 0.75 0.66 0.5

37. Calculate Tax Multiplier (same numbers) MPC 0.95 0.90 0.80 0.75 0.66 0.5

38. Calculate Tax Multiplier #23-28 MPC 23) 0.66666 24) 0.90 25) 0.5 26) 0.95 27) 0.66 28) 0.75

39. Calculate Spending Multiplier (write it next to the tax multiplier) MPC 0.66666 0.90 0.5 0.95 0.66 0.75

40. 2 nd Seating Chart (Front of Class) RachaelScottShelby Smith Paperw. HannahZach P.Heather Zach S. Bathroom JoshuaDavidWilliamJuhiAmanda Attendanc Shelby Stephens EmilyGarrett Boss AddieDanielle windowwindow

41. Seating Chart 4th (Front of Class) RachaelSierra Attndnc. SarahCoraCharlesKristen Brandon Bathroom RyanAnmolKyleJordanWill Boss Andrew CierraDylanCourtney J. MaciHunterGabrielleAlex H. Tanner Paperw. HannahAlex B.EmmaCody G. BrettAdamCliffMichael D. NicoleDanielle J.Cody J.Michael E. windowwindow

42. Fill in the blank. Independent Quiz

43. Big MPC or Small MPC? When do spending/tax changes have a bigger impact:

44. -than tax increases. Ceteris paribus, spending increases are more _____________________

45. Assumption: lump-sum tax

46. MPC=0.75 Government spending increases $40 billion. What’s the maximum possible affect on GDP/AD? Practice

47. MPC=0.75 Tax cut $25 billion. What’s the maximum possible affect on GDP/AD? #1

48. MPC=0.8 Government spending increases $200 billion. What’s the maximum possible affect on GDP/AD? #2

49. MPS=0.33333 Taxes cut $200 billion. What’s the maximum possible affect on GDP/AD? #3

50. MPS=0.25 Taxes raised $500 billion. What’s the maximum possible affect on GDP/AD? #4

51. MPC=0.8 Government spending increases $3oo million. Taxes are raised $300 million. Those policies have no net effect on the budget. What will be the net effect on GDP/AD? Balanced budget policies

54. Spending Increase: $50 MPC: 0.8

55. Spending Increase: $50 MPC: 0.8 What if MPC was 0.9?

56. Tax Cut: $50 MPC: 0.8

57. Which has the biggest effect??

58. MPC=0.90 Government spending increases $20 million. Taxes are raised $20 million. What will be the net effect on GDP/AD? Balanced budget policies

59. Net effect will equal original tax increase and/or spending increase. Just make sure they’re both being increased!! Balanced budget policies

60. MPS=0.25 What’s the maximum possible effect on GDP/AD if: 5) G increases $2 billion? 6) Tax cut $3 billion? 7) Tax increase $4 billion? 8) G increase $2b, tax decrease $2b? 9) G increase $2b, tax increase $2b? 10) G increase $5b, tax increase $5b?

61. MPS=0.66 What’s the maximum possible effect on GDP/AD if: 11) G decreases $310 million? 12) Tax increase $310 million? 13) G increase $310m, T decrease $310m? 14) G increase $310m, T increase $310m? 15) G decrease $310m, T decrease $310m?

62. Quiz

68. “Multiplier” Effects Marginal Prop. to Cons. -the fraction of additional DI consumed rather than saved. MPC = C/ DI MPS = S/ DI MPC + MPS = 1