1. AP ECONOMICS: October 29 Warm-up
--Draw a graph that shows the economy currently in long-run equilibrium. --Suppose that household wealth has been rising for several months creating a gap of $300B. Given this, adjust your graph to show both the short-run change in price level and real GDP. --If the government decided to intervene to close the gap, how much would it need to change it’s spending, taxation, and transfer payments? MPC=.75
--Describe how the economy will adjust in the long run. Using the graph you drew earlier, show this adjustment to long-run equilibrium.
Learning Target In order to understand how economic policy works, I will learn the factors that impact the money market. I will know I have it when I can accurately draw a money market graph and explain: (1) why the MD curve slopes downward; (2) what shifts the MD and MS curves; (3) the impact of the crowding out effect; and (4) the impact of the negative net export effect. Money Market (HO) --money market graph; transactions D vs. asset D; MD and MS curve shifters; crowding out effect; net exports effect Assignment Make sure you have watched the GC videos for Unit 4
Self-correcting Mechanism, Money Market (to include crowding out and net exports effect) Quiz is on Wednesday