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)

• Macro 3.10- Calculating the Spending Multiplier

• Macro 3.11- Multiplier and Spending Practice- AP Macro

B.  Multiplier Effects of Changes in Government Transfers and Taxes

• the tax multiplier M1 is less than the spending multiplier M. In fact: M1= MPC×M = MPC/(1-MPC)

• Macro 3.12- Multiplier and Taxes Practice

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

 

AP Economics