Transcript LESSON PLAN (main topics )

CONVEGNO REGIONALE CLIL – 21.11.2006
WORKSHOP TEMATICI – Economia politica
AGGREGATE DEMAND AND INCOME
MULTIPLIER
titolo del modulo
I. T. C. – indir. Mercurio – cl. 4^
classe -scuola
livello linguistico
B1
punto del programma
metà 2° quadrimestre
contenuti disciplinari
v. presentazione
numero di ore
3-5
materiale (libri, software, DVD,
videocassette, fotocopie…)
supporti
(laboratorio,
luminosa, video.)
compresenza
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Libro di testo, fotocopie (in L2)
lavagna
chalk and talk
sempre benvenuta
M. CECOTTI - I.T.C. "A. Zanon"
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AGGREGATE DEMAND
AND
INCOME MULTIPLIER
• Lesson 1
• Lesson 2
• Lesson 3
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The aggregate demand function
Spontaneous and induced
changes in aggregate demand
The income (GDP) multiplier
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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)
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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
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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
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CONVENTIONAL NOTATION
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Y
Yd
C
APC (c’)
MPC (c)
S
APS (s’)
MPS (s)
I
G
T
X
M
MPM (m)
AD (or A)
AS (or Su)


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= income (output)
= disposable income
= consumption
= average propensity to consume
= marginal propensity to consume
= saving
= average propensity to save
= marginal propensity to save
= investment
= government expenditure on goods and services
= taxation (direct and indirect)
= exports
= imports
= marginal propensity to import
= aggregate demand
= aggregate supply
= “a change in”, e.g. S = a change in savings
= the multiplier
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ESSENTIAL GLOSSARY
Aggregate demand (AD):
Aggregate supply (AS):
Consumption (C):
Investment (I):
Government expenditure (G):
the total of planned expenditure for the
economy as a whole.
the total output of all firms in the
economy (it’s the same as national
income).
the total spending of households on
goods and services.
it consists of capital goods (machinery,
equipment, factory buildings etc.).
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).
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Checking comprehension
Matching execises, e.g.:
the household sector
the firm sector
the government sector
the international sector
G
X
I
C
Answer simple questions:
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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.
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The basic graph
A
A=C+I+G
45°
0
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Ye
Yfe
M. CECOTTI - I.T.C. "A. Zanon"
Y
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STUDENTS AT WORK
WORK IN SMALL GROUPS
A
A2
A1
45°
0
Y
AD LINE HAS SHIFTED FROM A1 TO A2; WHAT MIGHT HAVE HAPPENED?
(make a list):
……………………………..
……………………………..
………………………….....
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