AP Economics – 4/20/2020


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


  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

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.