Unit 6: Aggregate Demand and Aggregate Supply

Unit 5

Chapter 11: Aggregate Demand and Aggregate Supply

Terms/Concepts/People

Aggregate demand-aggregate supply model; aggregate demand; aggregate supply; interest rate effect; foreign purchases effect; determinants of aggregate demand; horizontal range (of AS curve); intermediate range (of AS curve); vertical range (of AS curve); determinants of aggregate supply; productivity; equilibrium price level; equilibrium real output

Objectives

1. Define aggregate demand and aggregate supply.
2. Give 3 reasons why the AD curve slopes downward.
3. Illustrate, label and explain the 3 ranges of the aggregate supply curve.
4. State the determinants of the AD curve’s location.
5. Indicate the determinants of the supply curve’s location.
6. Explain how a market economy moves to equilibrium price and output level.
7. Predict effects of an increase in AD when economy is in the horizontal range, vertical range and intermediate range.
8. Explain how the multiplier is weakened in the intermediate and vertical range of AS.
9. State 3 basic causes of changes in AS differentiating between leftward and rightward shifts of the curve.

Required Assignments

Chapter 11 online quiz due March 25th

Aggregate Demand/Aggregate Supply quiz: March 26th

Big Graphs #9, #10, #11

Chapter 12: Fiscal Policy

Terms/Concepts/People

Council of Economic Advisors; discretionary fiscal policy; expansionary fiscal policy; budget deficit; contractionary fiscal policy; budget surplus; built-in stabilizer; progressive tax system; proportional tax system; regressive tax system; actual budget; cyclical budget; full-employment budget; political business cycle; crowding out effect; net export effect; supply-side fiscal policy

Key Objectives

1. Identify the roles of the CEA and JEC.
2. Distinguish between discretionary and nondiscretionary fiscal policy.
3. Differentiate between expansionary and contractionary fiscal policy.
4. Recognize the conditions for recommending an expansionary or fiscal policy.
5. Explain expansionary and contractionary fiscal policy and its effect on the economy.
6. Describe two ways to finance a government budget deficit and how each affects the economy.
7. Give two examples of how built-in stabilizers help eliminate recession or inflation.
8. Explain the differential impacts of progressive, proportional, and regressive taxes in terms of stabilization policy.
9. List three timing problems encountered with fiscal policy.
10. State four political problems that limit effective fiscal policy.
11. Explain and recognize graphically how crowding out and inflation can reduce the effectiveness of fiscal policy.
12. Give an example of supply-side fiscal policy and three possible positive effects from it.

Required Assignments

Chapter 12 online quiz due March 30th

Unit 5 Aggregate Demand/Aggregate Supply—Fiscal Policy Test April 2nd