lailah, ruby use a ppc, business cycle, as/ad and phillips curve … · 2019. 1. 11. · warm up:...

Miracle Monday, January 7Turn over a new leaf Tuesday, January 8

● Welcome back! I hope you all had a restful break● The following friends need to take the Unit 3a test this

Wednesday after school: Reese, Nate, Sebsastian F, Lailah, Ruby

● Warm up: Use a PPC, business cycle, AS/AD and Phillips Curve to show full employment, a recessionary gap, and an inflationary gap. Draw each in your notes!

● 1-Aliya, Reese, Sebastian, Yolian● 2-Ella, Ghizlane, Waid, Ivey● 3-Oliver, Sydni, Cat, Mercedes● 4-Harrison, Nadia, Marcus, Tariq● 5-Liv, Lily, Denzel, Ryan● 6-Theo, Ansley, David Mu., Amalia● 7-Josephine, Ethan, Kai, Maria, Rohit● 8-Het, Jeheil, Rainey, David Mc.


● Welcome back! I hope you all had a restful break● The following friends need to take the Unit 3a test this

Wednesday after school: Reese, Nate, Sebsastian F, Lailah, Ruby


● 1-Jaliyah, Jeremy, Devon● 2-Olivia, Emad, Jade, Mikhail● 3-Sydney, Annie, Nate, Idris● 4-David, Hermela, Saia, Harrison● 5-Amelia, Kennedy, Aizja● 6-Deja, Elizabeth, Melia● 7-Bentley, March, Jazmyn, Ethan● 8-Kaitlyn, Sydney Black


● Welcome back! I hope you all had a restful break

● Please note: I have LOST MY VOICE! Bear with me today and keep talking + volume low.

● The following friends need to take the Unit 3a test this Wednesday after school: Reese, Nate, Sebsastian F, Lailah, Ruby


Problem Set 5.1 front page

5Copyright ACDC Leadership 2018

http://www.youtube.com/watch?v=xKGtmzLP8gw&list=PLBC35DEA1D1A98034&index=12https://www.youtube.com/watch?v=xKGtmzLP8gw&list=PLBC35DEA1D1A98034&index=12

AD/AS and the Phillips Curve

Copyright ACDC Leadership 2018

Price Level

7

AD

AS


GDPRQY

PLe

LRAS Inflation

SRPC

UnemploymentUY

LRPC

Show what happens on both graphs if AD increases.

AD1


Price Level

8

AD

AS


GDPRQY

PLe

LRAS Inflation

SRPC

UnemploymentUY

LRPC

Correctly draw the LRPC and SRPC with a recessionary gap. What happens when AD falls?

AD1


Price Level

9

AD

AS


GDPRQY

PLe

LRAS Inflation

SRPC

UnemploymentUY

LRPC

Correctly draw the LRPC and SRPC at full employment. What happens when AS falls?

AS1

SRPC1


Price Level

10

AD

AS


GDPRQY

PLe

LRAS Inflation

SRPC

UnemploymentUY

LRPC

Correctly draw the LRPC and SRPC with a recessionary gap. What happens when AS goes up?

AS1

SRPC1Copyright ACDC Leadership 2018

Unit 3:Aggregate Demand and Supply and Fiscal Policy


What do you think...Should the government get involved in

order to recover from a recessionary gap?OR

Should the economy be left alone and allowed to correct itself over time?

What could be some positives and negatives of each option? 12

Adam Smith1723-1790

John Maynard Keynes1883-1946 13

Classicalvs.

KeynesianCopyright ACDC Leadership 2018

Whispering Wednesday, January 9Thirsting Thursday, January 10 (Team Shakespeare)

● Please note: I have LOST MY VOICE! Bear with me today and keep talking + volume low.

● The following friends need to take the Unit 3a test TODAY after school: Reese, Nate, Sebsastian F, Lailah, Ruby

● Homework due Friday (A) Monday (B)--see Edmodo

● Warm up:

1. Kaelah, Jackson, Winter, Brett2. Rahma, Jacob, Elliott, Charlotte3. Abby, Alex, Sam, Mohammed4. Ethan, Ansley, Sheniah, Parth5. Jaliyah, Viven, James, Lily6. Gray, Tushar, Bella, Nina7. Rainey, Dayton, Cassia, Mya

Frosty Friday, January 11Misty Monday, January 14 (Team Steak Sauce)

● Homework due today: Completion of work from Wednesday when I was sick.

● Any questions from HW 3-7 that I checked earlier this week?

● Warm up: Get out problem set 5.1 and make sure you completed the FRQ on the back of the page

1. Aliya, Reese, Sebastian, Yolian2. Ella, Waid, Ivey, Kai3. Oliver, Sydni, Cat, Mercedes4. Harrison, Nadia, Marcus, Tariq5. Liv, Lily, Ryan, Jeheil, Matthew6. Theo, Ansley, David Mu., Amalia7. Josephine, Ethan, Maria, Rohit8. Het, Rainey, David Mc., Gillian

Frosty Friday, January 11Misty Monday, January 14 (Team Energizer)


● Any questions from HW 3-7 that I checked earlier this week?

● Warm up:

1. Jaliyah, Jeremy, Kaitlyn, Ethan2. Emad, Jade, Hermela, Sydney

Black3. Sydney Bowens, Idris, Amelia4. David, Olivia, Saia, Harrison5. Kennedy, Aizja, Annie6. Deja, Elizabeth, Melia, Annie7. Bentley, March, Jazmyn

Frosty Friday, January 11Misty Monday, January 14 (Team Shakespeare)

● The following friends need to take the Unit 3a test TODAY after school: Reese, Lailah, Ruby


● Warm up:

1. Kaelah, Jackson, Winter, Brett2. Rahma, Jacob, Elliott, Charlotte3. Abby, Alex, Sam, Mohammed4. Ethan, Ansley, Sheniah, Parth5. Jaliyah, Viven, James, Lily6. Gray, Tushar, Bella, Nina7. Rainey, Dayton, Cassia

Frosty Friday, January 11Misty Monday, January 14 (Team Obi Wan)

● The following friends need to take the Unit 3a test TODAY after school: Reese, Lailah, Ruby


● Warm up:

1. Kaelah, Jackson, Winter, Brett2. Rahma, Jacob, Elliott, Charlotte3. Abby, Alex, Sam, Mohammed4. Ethan, Ansley, Sheniah, Parth5. Jaliyah, Viven, James, Lily6. Gray, Tushar, Bella, Nina7. Rainey, Dayton, Cassia

If you are new to A-1, please join this class and take yourself out of the old

one!Edmodo Codo: aasy72

If you are new to A-2, please join this class and drop the old one!

Edmodo Codo: 7cn7av

If you are new to B-1, please join this class and drop the old one!

Edmodo Codo: 8h89j9

If you are new to B-2, please join this class and drop the old one!

Edmodo Codo: 6bm437

Debates Over Aggregate SupplyClassical Theory1. A change in AD will not change output, even in the short run,

because prices of resources (wages) are very flexible. 2. AS is vertical so AD can’t increase without causing inflation.

Price level

Real domestic output, GDP

AS

Qf

AD

23

Recessions caused by a fall in AD are temporary.

Price level will fall and economy will fix itself.

No Government Involvement Required!

AD1Copyright ACDC Leadership 2018

24

John Maynard Keynes

“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists

set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when

the storm is past the ocean is flat again.”

Translation:In times of need, economists should do more than say that the economy will fix itself. They should suggest policies that can help the economy, like government

spending. Do you agree or disagree?


Debates Over Aggregate SupplyKeynesian Theory1. A decrease in AD will lead to a persistent recession because

prices of resources (wages) are NOT flexible. 2. Increase in AD during a recession doesn’t cause inflation.

Price level


AS

Qf

AD



prices of resources (wages) are NOT flexible. 2. Increase in AD during a recession puts no pressure on prices.

Price level


AS

Qf

AD

26Q1

“Sticky Wages” prevents wages from falling.

The government should deficit spend to close the

gap. AD1Copyright ACDC Leadership 2018


prices of resources (wages) are NOT flexible. 2. Increase in AD during a recession puts no pressure on prices.

Price level


AS

QfAD2

27

AD1Q1

When there is high unemployment, an increase

in AD doesn’t lead to higher prices until you get close to full employment.

AD3


Three Ranges of Aggregate Supply1. Keynesian Range- Horizontal at low output2. Intermediate Range- Upward sloping3. Classical Range- Vertical at Physical Capacity

Price level


AS

Qf 28

Keynesian Range Intermediate

Range

ClassicalRange


http://www.youtube.com/watch?v=HGjtcPssfCs&list=PLBC35DEA1D1A98034&index=13

Problem Set 5.1 back page

30

1995 Exam


31

1995 Exam


2006B Practice FRQ


Unit 3:Aggregate Demand and Supply and Fiscal Policy


The Car AnalogyThe economy is like a car…• You can drive 120 mph but it is not sustainable. (Extremely Low

unemployment)• Driving 20 mph is too slow. The car can easily go faster. (High

unemployment)• 70mph is sustainable. (Full employment)• Some cars have the capacity to drive faster than others. (industrial

nations vs. 3rd world nations)• If the engine (technology) or the gas mileage (productivity) increase then

the car can drive at even higher speeds. (Increase LRAS)The government often speeds up or slows down the economy by using fiscal

and/or monetary policy.


● Consumption is the most important part of the economy and the biggest part of GDP.

● Disposable income is the amount of income remaining after you pay your taxes. AKA net income.

● Consumers spend their disposable income as (1) autonomous spending and (2) discretionary spending. ○ Consumers will spend a certain amount of their disposable income no matter

what, regardless of their income. This is called autonomous spending (or consumption). For items like housing, food and utilities.

○ Discretionary income is the amount remaining after autonomous spending and includes additional spending, investing or saving; includes money spent on luxury items, vacations, and nonessential goods and services.

The Role of Consumers in the Economy

36

https://www.investopedia.com/terms/i/investing.asphttps://www.investopedia.com/terms/l/luxury-item.asp

● If incomes are less than autonomous spending, then there is dissaving (or negative savings--people have to borrow $ or dip into their savings).

● But what if incomes fall and people stop buying things? Who often steps in?

The Role of Consumers in the Economy, continued

37

How does the Government Stabilizes the Economy?

The Government has two different tool boxes to use:

1. Fiscal Policy-Actions by Congress to

stabilize the economy.2. Monetary Policy-Actions by the Federal

Reserve Bank to stabilize the economy.


For now we will only focus on Fiscal Policy.


Discretionary vs Non-DiscretionaryDiscretionary Fiscal Policy

• Congress creates a new bill that is designed to change AD through government spending or taxation.•One problem is lag times due to bureaucracy. •It takes time for Congress to act. •Ex: In a recession, Congress increases spending like the New Deal or the American Recovery and Reinvestment Act.


Discretionary vs Non-DiscretionaryNon-Discretionary Fiscal Policy

•AKA: Automatic Stabilizers•Permanent spending or taxation laws enacted to work “counter-cyclically” to stabilize the economy. •Ex: Welfare, Unemployment, Progressive Income Tax. When there is high unemployment, unemployment benefits to citizens increase consumer spending.


Great Depression New Deal vs Great Recession American Recovery and Reinvestment Act

42https://www.stlouisfed.org/publications/regional-economist/first_quarter_2017/the-recovery-act-of-2009-vs-fdrs-new-deal-which-was-bigger

Laws that reduce inflation, decrease GDP (Close an Inflationary Gap).

• Decrease Government Spending.• Increase Taxes (Decreasing disposable income).• Combinations of the Two.

Contractionary Fiscal Policy (The BRAKE)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap).

• Increase Government Spending.• Decrease Taxes (Increasing disposable income).• Combinations of the Two.

Expansionary Fiscal Policy (The GAS)


Problem Set 5.2:

Questions 8, 36, 11, 21 and 22

2008 Audit Exam


2012 Audit Exam


2012 Audit Exam

22. Which of the following are the most likely short-run effects of an increase in government expenditures?


lailah, ruby use a ppc, business cycle, as/ad and phillips curve … · 2019. 1. 11. · warm up:...

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