AP Economics – 4/15/19

I. Bellwork

• Page 200 MC 1-5 & FRQ #2

II.  Objectives

• Discuss how the AS–AD model is used to formulate macroeconomic policy
• Explain the rationale for stabilization policy
• Describe the importance of fiscal policy as a tool for managing economic fluctuations
• Identify the policies that constitute expansionary fiscal policy and those that constitute contractionary fiscal policy

III. Economic Policy Aggregate Demand & Supply Model pgs 201-208

A Macroeconomic Policy

1. Policy in the Face of Demand Shocks – Examples
2. Responding to Supply Shocks – Difficult and only resolves one on the issues

B.  Fiscal Policy: The Basics

1. Taxes, Purchases of Goods and Services, Government Transfers, and Borrowing

• Explain in terms of Expansionary & Contractionary Policy

2. The Government Budget and Total Spending
3. Expansionary and Contractionary Fiscal Policy
4. A Cautionary Note: Lags in Fiscal Policy

• Major Lags -Recognition, Decision, & Implementation

iV,  Read Exam Tip on Page 207

V.  Classwork

• 20.5 WS on iLearn – Due today
• 20.5 Questions due tomorrow before class

VI.  Test on Thursday

AP Economics