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For more information, please see full course syllabus of AP Macroeconomics
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Lecture Comments (4)

1 answer

Last reply by: Professor Jibin Park
Wed Apr 29, 2015 12:59 PM

Post by Kim Gyu Min on April 28, 2015

I'm little bit confused by the massive information I just unlocked.

1.CF(Consumer function)will shift up when there is positive effect and shift down when there is negative effect.

2.In the APtest do they just say Multiplier or Spending multiplier or tax multiplier? this multiplier terminology will be specified?

3.Is Aggregate expenditure important? should I study it?

0 answers

Post by Abdullahi Houssein on May 16, 2014

How come the aggregate expenditure wasn't explained?

0 answers

Post by Angela Patrick on May 14, 2014

Could you explain why the entire line shifted in example 1 and why it didn't just tilt more towards a flat horizontal line?

Fiscal Policy & The Multiplier

  • The MPC stands for the marginal propensity to consume
  • The MPS stands for the marginal propensity to save
  • MPS = 1 – MPC
  • The multiplier formula = 1/(1-MPC)
  • The consumption function, which shows how an individual household’s consumer spending changes with disposable income, is c = a + MPC x yd
  • The tax multiplier is (MPC)/(1-MPC)
  • Government spending has a greater impact than a tax cut in stimulating the economy because individuals tend to save some of their income

Fiscal Policy & The Multiplier

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:09
  • The MPC and MPS 1:19
    • Investment Spending Increases
    • Increased Output
    • Marginal Propensity to Consumer and Marginal Propensity to Save
    • MPC
    • MPS
  • The Marginal Propensity to Consume 3:57
    • Number Is 0
    • Number is 1
    • Number is Usually Between 0 and 1
    • Number is 0.8
    • Formula
  • The Multiplier Effect 9:51
    • Autonomous Change in Aggregate Spending
    • Multiplier
    • Size of the Multiplier
  • Consumption Function 13:15
    • Equation Showing How an Individual's Household's Consumer Spending Changes with Disposable Income
    • Autonomous Consumer Spending
    • Formula
    • Example
  • Consumption Function Example 18:27
  • Shifts of the Aggregate Consumption Function 21:31
    • Changes in Expected Future Disposable Income
    • Changes in Aggregate Wealth
  • Investment Spending 24:12
    • If Interest Rates Go Up or Down
    • Expected Future Growth
    • Formula
    • Positive Unplanned Inventory Investment
  • Tax (or Government Transfer) Multiplier 26:38
  • Automatic Stabilizers 31:26
    • As the Economy Expands
    • As the Economy Contracts
  • 2008 and 2009 Stimulus Package 33:20
    • 2008 Question of Tax Cuts or Transfer Payments
    • 2009 American Recovery and Reinvestment Act
  • Example 1 38:23
  • Example 2 41:19
  • Example 3 42:33
  • Example 4 43:13