1. 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

2. Stock Market Game and Kidney Shortage News

3. Reading/HW Assignment Changes M16 Today, M17 Thursday, M18 Friday HW due date changed to next Tuesday. (HW: pg. 217 #4,7,13a-c)

4. APC/APS problems from yesterday (Michael was right)

5. Total income: $2,000 Total spending: $1,900  Average Propensity to Consume: ??  Average Propensity to Save:??  Let’s say autonomous consumption is $500.  What’s this person’s MPC??

6. Green Book Assignment

7. Formula Quiz

8.  1) C=$5, I=$2, G=$3, M=$4, GDP=$8. What is X?  2) Market Basket Price (Base Year)=$20. Market Basket Price (Year 2)=$25. What’s the value of the price index in year 2?  3) Price index Year A: 200 Price index Year B: 250 --Inflation between Years A&B?  4) Frictional U. is 4%. Natural Rate of U. is 7%. What is the Structural Rate of U?  5) Real interest rate was 3%. Inflation was 8%. What was nominal interest rate?  6) MPS is 0.2. What is the tax multiplier?

9. Why is MPC/MPS/Multiplier important?

10. Check your grade, figure out why you missed what you missed, and return. Independent Quiz

11. If the MPC is big or small? When do spending/tax changes have a bigger impact:

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

13. Assumptions: lump-sum tax “closed” economy

14. 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

15. Total income: $500 Total spending: $400  1) Average Propensity to Consume: ??  2) Average Propensity to Save:??  Let’s say autonomous consumption is $100.  3) What’s this person’s MPC??

16. Swap Paper w Partner

17. Total income: $5,000 Total spending: $4,500  4) Average Propensity to Consume: ??  5) Average Propensity to Save:??  Let’s say autonomous consumption is $500.  6) What’s this person’s MPC??

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

19. MPC=0.75 Tax cut $25 billion. What’s the maximum possible affect on GDP/AD? #7

20. Swap Paper w Partner

21. MPC=0.8 Government spending increases $200 billion. What’s the maximum possible affect on GDP/AD? #8

22. Swap Paper w Partner

23. MPS=0.33 Taxes cut $200 billion. What’s the maximum possible affect on GDP/AD? #9

24. Swap Paper w Partner

25. MPS=0.25 Taxes raised $500 billion. What’s the maximum possible affect on GDP/AD? #10

26. Swap Paper w Partner

27. 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

28. 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

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

30. MPS=0.25  What’s the maximum possible effect on GDP/AD if:  11) G increases $2 billion?  12) Tax cut $3 billion?  13) Tax increase $4 billion?  14) G increase $2b, tax decrease $2b?  15) G increase $2b, tax increase $2b?  16) G increase $5b, tax increase $5b?

31. Swap Paper w Partner

32. 2 nd Seating Chart 3 (Front of Class) RachaelScottShelby Smith Paperw. HannahZach P.Heather Zach S. Bathroom JoshuaDavidWilliamJuhiAmanda Attendanc Shelby Stephens EmilyGarrett Boss AddieDanielle windowwindow

33. 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

34. Reading/HW Assignment Changes M17 Thursday, M18 Friday HW due date changed to next Tuesday. (HW: pg. 217 #4,7,13a-c)

35. MPC=0.66  What’s the maximum possible effect on GDP/AD if:  17) G decreases $310 million?  18) Tax increase $310 million?  19) G increase $310m, T decrease $310m?  20) G increase $310m, T increase $310m?  21) G decrease $310m, T decrease $310m?

36. MPC/MPS/Multiplier Quiz

37.  If a family’s MPC is.6, it is:  a. spending 60 percent of its total income on consumer goods  b. necessarily dissaving  c. spending six-tenths of any additional income it receives  d. operating at the break-even point

38.  Which of the following will tend to shift the consumption line downward?  a) a shrinking level of consumer debt  b) an increasing level of wealth or assets held by consumers  c) expectations of future decreases in the consumer price index  d) decreasing interest rates

39.  Which of the following will tend to shift the consumption line upward?  a) a stock market crash.  b) rising consumer confidence about the economy.  c) expectations of future deflation.  d) increasing interest rates

40. Suppose that autonomous consumption is $400 and that the marginal propensity to consume is 0.8. If disposable income increases by $1,200, consumption spending will increase by  (A) $1,600  (B) $1,360  (C) $1,200  (D) $ 960  (E) $ 400

41. Suppose that autonomous consumption is $400 and that the marginal propensity to consume is 0.33. If disposable income increases by $1,200, consumption spending will increase by  (A) $1,600  (B) $1,360  (C) $1,200  (D) $ 960  (E) $ 400

42. In a closed economy with only lump-sum taxation, if the marginal propensity to consume is equal to 0.66, a $70 billion increase in government spending could cause a maximum increase in output of  (A) $70 billion  (B) $122.5 billion  (C) $210 billion  (D) $280 billion  (E) $350 billion

43. In a closed economy with only lump-sum taxation, if the marginal propensity to consume is equal to 0.8, a $70 billion increase in government spending could cause a maximum increase in output of  (A) $70 billion  (B) $122.5 billion  (C) $210 billion  (D) $280 billion  (E) $350 billion

44. A decrease in government spending will have a smaller effect on equilibrium GDP the:  a) larger the marginal propensity to consume  b) smaller the marginal propensity to save  c) smaller the marginal propensity to consume  d) smaller the average propensity to save

45. Module 17 Aggregate Demand

46.  The demand for everything.  New Graph:

47. Why AD is downward sloping:  Wealth effect:  Interest rate effect:  New phrase you’re going to need to know for FRQ’s:  Foreign purchases effect:

48. Expenditure Model and AD  AD consists of C+I+G+(X-M)  Anything that changes C, I, G, or (X-M) shifts AD. PL RGDP AD

49. (Other) AD Shifters  Expectations  Consumer  Producer  Prices  Wealth  Debt  Fiscal Policy  Taxes  Spending  Monetary Policy  Money Supply  Interest Rates

50. Move Along, Increase-Right, Decrease-Left PL RGDP AD

51. AD Handout

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