1. 1. If a person’s MPC is .9, which is true:
A. They spend more than they earn
B. If they get a raise they will spend about 90% of it
C. If they get a raise they will save 90% of it
D. This person spends an average of 90% of their income
2. What is the APC formula?
3. Why is APC the inverse of APS?
4. If you could make yourself richer but have your
grandkids pay for it, would you?

2. Population boom 1950s
Draw short run changes
INVISIBLE
HAND
WILL FIX IT

3. New technology for firms to build goods
Draw changes
INVISIBLE
HAND
WILL FIX IT

4. Housing “bubble” of 2000’s
Draw changes
INVISIBLE
HAND
WILL FIX IT

5. Panics
1797
1815-1821
1873
1893
1907
Classical
response…..
Karl Marx watched
and commented
QE Assignment:
Small timeline of
these recessions for
my wall.
Dates, cause, life
during, picture

6. Pronounced
“Canes”
Founder of
“Keynesianism”
Opposed to
“Classical ideas”
Great Depression
Rock Star of Econ
“In the LR, we are
all dead”

8. US GDP only growing
at 1.7 %
Congress wants to
boost SRAD and GDP
Which policy would
increase AD by the
largest amount?
Policy A: lower income tax rates by 5 %
Policy B: Increase spending by 5 % (ask Fed to
increase money supply by 5% to offset deficit)
Policy C: Obama’s plan

11. Government spending actually can increase
SRAD by more than spending
Fiscal Multiplier = 1 / (1 – MPC)
Trade off?
Stossel clip
leakage

17. Larger effect in SR?
LR problem?

19.  Poster explaining active Keynesian stabilization
policies pages 773-778
• Pictures, maybe a graph, explanation of stabilizers, multiplier
effect
 Mankiw, Ch34 Problems: 4, 5, 7, 9, 10, 13
 Find 4 + bloggers discussing fiscal spending, cite
the source and evaluate their ideas (what is their
view of the spending multiplier, agree/disagree &
why). (Mises.org, planet
money, lewrockwell.com, marginal
revolution, Mankiw, Krugman, WSJ, Café Hayek)