Shanghai Livingston American School Quarterly / Trimester Plan 2 Concept / Topic To Teach: Specific Objectives: Week 1 Week 2 Week 3 Week 4 Unit 3 Module 16 INCOME AND EXPENDITURES Comprehend the nature of the multiplier, which shows how initial changes in spending lead to further changes. Give the meaning of the aggregate consumption function, which shows how current disposable income affects consumer spending. Unit 3 INCOME AND EXPENDITURES (continued) Show the determinants of investment spending. Discuss why investment spending is considered a leading indicator of the future state of the economy. Unit 3 continued Module 17 AGGREGATE DEMAND: Describe how the aggregate demand curve illustrates the relationship between the aggregate price level and the quantity of aggregate output demanded in the economy. Discuss how the wealth effect and interest rate effect explain the aggregate demand curve s negative slope. Unit 3 continued AGGREGATE DEMAND: Determine the factors that shift the aggregate demand curve. Demonstrate each shifter on the graph using the AS-AD model. ELD Standards State and display aggregate consumption function. State and display aggregate saving function. Describe aggregate demand curve. Describe aggregate demand curve and determine its shifters. Specific Vocabulary The marginal propensity to consume MPC = (Δ Consumption/Δ Disposable Income). The marginal propensity to save MPS = (Δ Saving/Δ Disposable Income). The spending multiplier M= 1/(1-MPC) = 1/MPS. If aggregate autonomous spending changes by (ΔAAS) dollars, the multiplier effect will change real GDP (it is common in macroeconomics to label real GDP = C + I + G + (X-IM), Wealth Effect Interest Rate Effect GDP = C + I + G + (X-IM), Changes in Expectations Changes in Wealth Size of the Existing Stock of Physical Capital Fiscal Policy
MPC + MPS = 1 The spending multiplier M= 1/(1-MPC) = 1/MPS. GDP with Y) by a greater amount ΔY = M ( ΔAAS). Investment spending is negatively related to the interest rate. Monetary Policy Autonomous changes in investment spending have the same multiplying impact on real GDP as changes in autonomous consumption. Assessment Based On Objectives: Core Value(s) Addressed: Week 5 Week 6 Week 7 Week 8 Concept / Topic To Teach: MODULE 18: AGGREGATE SUPPLY: MODULE 18: AGGREGATE SUPPLY: (continued) MODULE 19: EQUILIBRIUM IN THE AGGREGATE DEMAND/AGGREGATE Module 20: Economic Policy and the Aggregate Demand/Aggregate Supply Model
SUPPLY MODEL Specific Objectives: Explain how the aggregate supply curve illustrates the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy. Determine the factors that shift the aggregate supply curve. Contrast the aggregate supply curve in the short run from the long run. State the difference between short-run and long-run macroeconomic equilibrium. Know the causes and effects of demand shocks and supply shocks. Determine if an economy is experiencing a recessionary gap or an inflationary gap. Explain how the AD AS model is used to formulate macroeconomic policy. Give the rationale for stabilization policy. Calculate the size of output gaps. ELD Standards Display AS curve Distinguish SRAS and LRAS curves Policy Specific Vocabulary The short-run AS curve is upward sloping because resource prices, particularly nominal wages, are sticky. That means that when the aggregate price level rises, nominal wages rise more slowly. This allows producers to earn more profit per unit so output rises. The long-run AS curve is vertical because in the long run, all prices are flexible. The long-run AS curve is located at the economy s level of potential output. This is the output that could be produced when all prices are flexible. The model assumes that the economy is always in a state of short-run equilibrium where AD intersects SRAS. If current real GDP differs from Yp, there is either a recessionary or inflationary gap in the short run. In the long run, when all prices are flexible, the model predicts that SRAS will adjust so that AD, SRAS and LRAS all intersect at Yp. This is seen in the key graph below. Macroeconomic Policy A. Policy in the Face of Demand Shocks B. Responding to Supply Shocks
Demand and Supply Shocks External shocks to AD or SRAS affect the equilibrium price level and real GDP. Assessment Based On Objectives: Core Value(s) Addressed: Week 9 Week 10 Week 11 Week 12 Concept / Topic To Teach: Module 20: Economic Policy and the Aggregate Demand/Aggregate Supply Model (continued) MODULE 21: FISCAL POLICY AND THE MULTIPLIER MODULE 21: FISCAL POLICY AND THE MULTIPLIER Unit 4 MODULE 22: SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM Specific Objectives: Discuss why fiscal policy is an important tool for managing economic fluctuations. Explain which policies constitute expansionary fiscal policy and which constitute contractionary fiscal policy. Recall the multiplier. Explain why fiscal policy has a multiplier effect. Show how the multiplier effect is influenced by automatic stabilizers. Practice problems. Describe the relationship between savings and investment spending. Discuss the purpose of the five principal types of financial assets: stocks, bonds, loans, real estate, and bank deposits.
ELD Standards Policy Policy and use multiplier Policy and use multiplier Analyze the money market Specific Vocabulary Fiscal Policy: The Basics A. Taxes, Purchases of Goods and Services, Government Transfers, and Borrowing B. The Government Budget and Total Spending C. Expansionary and Contractionary Fiscal Policy D. A Cautionary Note: Lags in Fiscal Policy Multiplier Effects of an Increase in Government Purchases of Goods and Services Multiplier Effects of Changes in Government Transfers and Taxes How Taxes Affect the Multiplier Multiplier Effects of an Increase in Government Purchases of Goods and Services Multiplier Effects of Changes in Government Transfers and Taxes How Taxes Affect the Multiplier Matching Up Savings and Investment Spending A. The Savings Investment Spending Identity II. The Financial System A. Three Tasks of a Financial System 1. Reducing Transaction Costs 2. Reducing Risk 3. Providing Liquidity B. Types of Financial Assets 1. Loans 2. Bonds 3. Loan-backed Securities 4. Stocks C. Financial Intermediaries 1. Mutual Funds 2. Pension Funds and Life Insurance Companies 3. Banks Assessment Based On Objectives: Core Value(s) Addressed: