DUE WEDNESDAY

I.  Objectives:

• Describe the multiplier process by which initial changes in spending lead to further changes in spending
• Use the consumption function to show how current disposable income affects consumer spending
• Explain how expected future income and aggregate wealth affect consumer spending
• Identify the determinants of investment spending
• Explain why investment spending is considered a leading indicator of the future state of the economy

II.  Income & Expenditure  pages 159-169

A.  The Multiplier

1. Marginal Propensity to Consume  MPC = (Δ Consumer Spending/Δ Yd)
2. Spending Multiplier   1/(1-MPC)
3. Consumer Spending   Yd = C + S  &  MPC + MPS = 1
4. Current Disposable Income and Consumer Spending  
5. Macro 3.9- Multiplier Effect, MPC, and MPS (AP Macroeconomics)
6. The Multiplier Effect- Macro 3.9B

B.Shifts of the Aggregate Consumption Function C= a + MPC × Yd

1. Changes in Expected Future Disposable Income
2. Changes in Aggregate Wealth

C. Investment Spending

MODULE 16 NOTE PART 2: CONSUMPTION FUNCTION & INVESTMENT SPENDING

1. The Interest Rate and Investment Spending
2. Expected Future Real GDP, Production Capacity, and Investment Spending

D. Inventories & Unplanned Investment Spending pg 169 – Thinking Map (Positive and Negative Planned Inventory)

III.  Classwork

• Homework 16.1 & 16.2 WS on iLearn
• Module 16 iLearn Part A Questions