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Just some useful notes for the AP Macro...
(3.1) What is aggregate demand (=aggregate spending/expenditures)?
Sum of demand for all goods and services in an economy by C, I, G and Xn
(3.1) What is the downward-sloping aggregate demand curve used to depict?
It is used to depict the inverse relationship between the quantity of aggregate output demanded and the aggregate price level; PL↑QAD↓.
(3.1) Identity of Real GDP
Real GDP = aggregate demand = aggregate spending (C, I, G, Xn)
(3.1) AD/AS Model?
(3.1) AD Curve?
(3.1) What is included in investment spending (Ig)?
Expectations of economic conditions, interest rates, unplanned changes in business inventories.
(3.1) Economic Policy and Aggregate Demand
(3.1) What is the relationship between exports and aggregate demand, imports and aggregate demand, respectively?
(3.1) What shifts the AD curve?
Increase in C, I, G, or X will shift it right; decrease will shift it left
(3.2) Marginal Propensity to Consume (MPC) Formula?
(3.2) Marginal Propensity to Save (MPS) Formula?
(3.2) What is autonomous spending?
Autonomous spending is spending that is independent of income.
(3.2) What is a function of the MPC?
The amount by which AD changes as a result of change in autonomous expenditure is a function of the MPC
(3.2) A $1 change in autonomous expenditures leads to…
A $1 change in autonomous expenditures leads to a total change in AD greater than $1 because one person’s spending is another person’s income.
(3.2) MPC + MPS = ?
MPC + MPS = 1
(3.2) Spending multiplier formula?
(3.2) Notes about the spending multiplier…
(3.2) Tax Multiplier Formula & Transfer Multiplier Formula?
Note that if its a transfer multiplier (same formula) there is no need for the negative sign as it is a positive relationship…
(3.2) Balanced Budget Multiplier Formula
