1. AP Macro Week#7 Fall 2014

2. Economics 10/13/14 http://mrmilewski.com http://mrmilewski.com OBJECTIVE: Demonstrate mastery of Chapters#23,24, & 26. AP Macro-I.E Language objective: Write about the business cycle, unemployment and inflation. I. Test#2

3. Economics 10/14/14 http://mrmilewski.com http://mrmilewski.com NO SCHOOL: Professional Development Day

4. Economics 10/15/14 http://mrmilewski.com http://mrmilewski.com OBJECTIVE: Sign onto AP Economics Learn Smart Language objective: Read about website. I. Administrative Stuff -login information -https://connect.mheducation.com/class/b-sloma- ap-economics-5 th -hour - 8KXB-VCP3-N9Q3-BBDK-NDQV II. Homework -complete extra credit on learn smart

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6. Economics 10/16/14 http://mrmilewski.com http://mrmilewski.com OBJECTIVE: Review Test#2. AP Macro-II.B Language objective: Talk about Test#2. I. Review Test#2 -answer questions about Test#2 II. Learnsmart -continue working on extra credit Homework: Complete extra credit online.

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8. Economics 10/17/14 http://mrmilewski.com http://mrmilewski.com OBJECTIVE: Begin examination of Chapter#27 AP Macro-II.B Language objective: Talk about basic macroeconomic relationships. I. Journal#22 -notes on basic economic relationships Homework: Complete new assignment on Learnsmart by Sunday at Midnight.

9. Income Consumption and Saving Consumption and saving Primarily determined by DI Direct relationship Consumption schedule Planned household spending (in our model) Saving schedule DI minus C Dissaving can occur LO1 27-9

10. Income, Consumption, and Saving LO1 27-10

11. Consumption and Saving Schedules Consumption and Saving Schedules (in Billions) and Propensities to Consume and Save (1) Level of Output and Income GDP=DI (2) Consumption (C) (3) Saving (S), (1) – (2) (4) Average Propensity to Consume (APC ), (2)/(1) (5) Average Propensity to Save (APS), (3)/(1) (6) Marginal Propensity to Consume (MPC),  (2)/  (1)* (7) Marginal Propensity to Save (MPS),  (3)/  (1)* (1) $370$375$-51.01-.01.75.25 (2) 390 390 01.00.00.75.25 (3) 410 405 5.99.01.75.25 (4) 430 420 10.98.02.75.25 (5) 450 435 15.97.03.75.25 (6) 470 450 20.96.04.75.25 (7) 490 465 25.95.05.75.25 (8) 510 480 30.94.06.75.25 (9) 530 495 35.93.07.75.25 (10) 550 510 40.93.07.75.25 LO1 27-11

12. Consumption and Saving Schedules 500 475 450 425 400 375 45° 50 25 0 370390 410 430 450 470 490 510 530 550 C S Consumption schedule Saving schedule Saving $5 billion Dissaving $5 billion Dissaving $5 billion Saving $5 billion Consumption (billions of dollars) Saving (billions of dollars) Disposable income (billions of dollars) LO1 27-12

13. Average Propensities Average propensity to consume (APC) Fraction of total income consumed Average propensity to save (APS) Fraction of total income saved APC =APS = consumption income saving APC + APS = 1 LO1 27-13

14. Global Perspective LO1 27-14

15. Marginal Propensities Marginal propensity to consume (MPC) Proportion of a change in income consumed Marginal propensity to save (MPS) Proportion of a change in income saved MPC =MPS = change in consumption change in income change in saving MPC + MPS = 1 LO1 27-15

16. Marginal Propensities Disposable income Consumption Saving S C MPC = MPS = 15 20 =.75  C ($15)  DI ($20)  S ($5) 5 20 =.25 LO1 27-16

17. Nonincome Determinants Amount of disposable income is the main determinant Other determinants Wealth Borrowing Expectations Real interest rates LO2 27-17

18. Other Important Considerations Switching to real GDP Changes along schedules Simultaneous shifts Taxation Stability LO2 27-18

19. Shifts of C & S Schedules 45° C0C0 S0S0 Real GDP (billions of dollars) Consumption (billions of dollars) Saving (billions of dollars) C2C2 C1C1 S1S1 S2S2 0 0 - + LO2 27-19

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