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Topic 3.1- Aggregate Demand (AD) Topic 3.2- Multipliers 1. What is the difference between a market demand 1. What is the multiplier effect? curve and the aggregate demand curve? 2. What three concepts explain why aggregate demand 2. Define marginal propensity to consume (MPC). is downward sloping? 3. Define marginal propensity to save (MPS). 3. What are the shifters of aggregate demand? 4. Equation for the simple spending multiplier. Topic 3.3- Short-run Aggregate Supply (SRAS) 5. Equation for the tax multiplier. 1. Why is short-run aggregate supply upward sloping? 6. Fill in the blanks below: Initial Initial Maximum Initial MPC Change Amount Change Change 2. What are the shifters of short-run aggregate supply? I G $30 billion $60 billion I G C .9 $200 billion C I Taxes $10 billion 8 Taxes 75 1$80 billion Topic 3.4- Long-run Aggregate Supply (LRAS) I M $10 billion 9 1. Why is long-run aggregate supply vertical? X $10 billion $50 billion Transfer $20 billion .9 1 Transfer Payments Payments Topic 3.5- Equilibrium in the AD-AS Model 1. Draw an economy with a negative 2. Draw an economy at full 3. Draw an economy with a positive output gap employment output gap