1. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"1 CONVEGNO REGIONALE CLIL – 21.11.2006 WORKSHOP TEMATICI – Economia politica titolo del modulo AGGREGATE DEMAND AND INCOME MULTIPLIER classe -scuolaI. T. C. – indir. Mercurio – cl. 4^ livello linguisticoB1 punto del programmametà 2° quadrimestre contenuti disciplinariv. presentazione numero di ore3-5 materiale (libri, software, DVD, videocassette, fotocopie…) Libro di testo, fotocopie (in L2) supporti (laboratorio, lavagna luminosa, video.) chalk and talk compresenza sempre benvenuta

2. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"2 AGGREGATE DEMAND AND INCOME MULTIPLIER Lesson 1The aggregate demand function Lesson 2Spontaneous and induced changes in aggregate demand Lesson 3The income (GDP) multiplier

3. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"3 LESSON 1 PLAN (main topics) The AGGREGATE DEMAND FUNCTION and its components [a quick revision: A=C+I+G+(X-M)]; The concept of EQUILIBRIUM NATIONAL INCOME (domestic output) Ye; The concept of FULL EMPLOYMENT LEVEL OF INCOME (output) Yfe (= the maximum level of income (real output) the economy is capable of producing with the existing capacity)

4. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"4 LESSON 2 PLAN (main topics) Effects of spontaneous and induced changes in the level of A (Ye): choices for households and firms economic policy options –loose bias –tight bias

5. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"5 LESSON 3 PLAN (main topics) The NATIONAL INCOME (domestic output) MULTIPLIER a graphic representation the concept and the description of income generation triggered by an initial change in the level of autonomous expenditure deriving the multiplier from AD and C equations

6. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"6 CONVENTIONAL NOTATION Y= income (output) Yd= disposable income C= consumption APC (c)= average propensity to consume MPC (c)= marginal propensity to consume S= saving APS (s)= average propensity to save MPS (s)= marginal propensity to save I= investment G= government expenditure on goods and services T= taxation (direct and indirect) X= exports M= imports MPM (m)= marginal propensity to import AD (or A)= aggregate demand AS (or Su)= aggregate supply = a change in, e.g. S = a change in savings = the multiplier

7. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"7 ESSENTIAL GLOSSARY Aggregate demand (AD):the total of planned expenditure for the economy as a whole. Aggregate supply (AS): the total output of all firms in the economy (its the same as national income). Consumption (C):the total spending of households on goods and services. Investment (I):it consists of capital goods (machinery, equipment, factory buildings etc.). Government expenditure (G):local and central government expenditure on goods and services. Marginal propensity to consume [MPC (c)]:the rate of change of consumption with respect to income; MPC = C/ Y (c = C/ Y). Average propensity to consume [APC (c)]:the proportion of total income spent on consumption; APC = C/Y (c = C/Y).

8. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"8 Checking comprehension Matching execises Matching execises, e.g.: the household sectorG the firm sectorX the government sectorI the international sectorC Answer simple questions: Firms expenditure on investment goods depends both on …….. and ……… The slope of the AD line depends on …………………….. If MPC = 0, then α = ………………. An increase in α value leads to a steeper/flatter AD line. Etc.

9. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"9 The basic graph A A=C+I+G 45° 0 Ye Yfe Y

10. 21 novembre 2006M. CECOTTI - I.T.C. "A. Zanon"10 STUDENTS AT WORK WORK IN SMALL GROUPS A A2 A1 45° 0Y0Y AD LINE HAS SHIFTED FROM A1 TO A2; WHAT MIGHT HAVE HAPPENED? (make a list): …………………………….. ………………………….....