1. Unit 3 Problem Set Rubric

2. Question 1

3. Question #1 A. MPC and MPS 2 Point- Definition of the MPC
2 Point- Definition of the MPS
1 Point- Example
B. MPC and MPS
2 Point- Definition of Multiplier Effect
2 Point- Definition of the Spending Multiplier
1 Point- Examples

4. Question #1 C. MPC and MPS 2 Point- Definition Deficit Spending
2 Point- Definition of Crowding Out
1 Point- Example

5. Question 2

6. Question #2 A. Fiscal Policy 1 Point- Definition of Discretionary
1 Point- Definition of Non-discretionary
1 Point- Definition of Expansionary
1 Point- Definition of Contractionary
1 Point- Examples

7. Question #2 B. Fiscal Policy 1 Point- Graph for recession
1 Point- Graph for inflationary gap
1 Point- Policies to close recessionary gap
1 Point- Policies to close an inflationary gap
1 Point- Effects of policy on graph

8. Question #2 C. Fiscal Policy 1 Point- Graph for recession
1 Point- Graph for inflationary gap
1 Point- Long-run effect when wages fall in a recession
1 Point- Long-run effect when wages rise in an inflation
1 Point- Effects on graph

9. Question #2 D. Fiscal Policy 1 Point- Graph for Phillips curve
1 Point- Recession
1 Point- Inflationary Gap
1 Point- Full employment
1 Point- Changes in AD move along the SRPC and shifts in AS shift the SRPC

10. Question 3

11. Question #3 Economic Growth 1 Point- Definition Capital Stock
1 Point- AD Increase in short-run
1 Point- AS Increase in the long-run
1 Point- LRAS increase in long-run
1 Point- Changes in consumer spending doesn’t increase capital stock so the AS doesn’t shift

12. Question 5