AP Economics – 4/16/19

I.  Bellwork

  • Page 209 MC 1-5 & Page 210 FRQ #2

II.  Objectives

  • •Explain why fiscal policy has a multiplier effect
  • •Describe how automatic stabilizers influence the multiplier effect

III. Discussion Fiscal Policy & Multiplier Effects pgs. 211-215

A.  Multiplier Effects of an Increase in Government Purchases of Goods and Services Spending multiplier     = 1/(1-MPC)

B.  Multiplier Effects of Changes in Government Transfers and Taxes

C.  How Taxes Affect the Multiplier

Examples: the progressive tax system and unemployment benefits. In a recession, incomes fall, and tax rates go down “automatically”. While people receive unemployment benefits so transfers increase during recessions.

IV.  Claaswork

  • Worksheet 21.1 & 21.2
  • Module 21 Questions

V.  Test on Thursday

 


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