Reading from Mankiw Principles of Economics: Ch. 25-27

    National Income and Price Determination
     20  Days
     Power Points
    Supplemental Readings
    Video Resources

    The material in this unit is the heart of a Macroeconomics course. Since the material is complex, students will need a theoretical construct to organize the concepts; that construct will be the Aggregate Supply-Aggregate Demand model. Students will build the components of the Classical and Keynesian models, including the consumption function, the investment function, the marginal propensity to consume and to save, and the multiplier, and will practice the simple algebra of income determination and determine Keynesian equilibrium. Finally, the relevance of this analysis to fiscal policy decisions will be shown by identifying the goals and tools of fiscal policy and end by analyzing fiscal policy through the economic concepts developed in this unit. This unit will make up 25-30% of the AP Exam.


    1. Define Aggregate Demand, Aggregate Supply and Equilibrium
    2. List and explain the basic causes of shifts in Aggregate Demand and Aggregate Supply
    3. Graph Aggregate Demand and Aggregate Supply
    4. Describe what determines the amount of goods and services produced and the level of employment in the Classical theory of Aggregate Supply-Aggregate Demand
    5. Describe what determines the amount of goods and services produced and the level of employment in the Keynesian theory of Aggregate Supply-Aggregate Demand
    6. Explain how Consumption and Saving are related to Disposable Income in the Keynesian model
    7. Describe and calculate from given data the Marginal Propensity to Consume and the Marginal Propensity to Save
    8. Describe the Multiplier
    9. Given values for the marginal Propensity to Consume, calculate the values for the Multiplier
    10. Calculate the change in total spending that occurs from a given change in Business or Government
    expenditures when MPC is known
    11. Describe Keynesian Equilibrium in words and diagrams
    12. Explain the Equilibrium levels of Output and Employment in Keynesian analysis when prices are free to vary
    13. Explain and show graphically how Fiscal Policy can be used to reduce and Inflationary or Recessionary Gap
    14. Describe how Fiscal Policy can be used to stabilize the economy
    15. Distinguish between Automatic and Discretionary Stabilizers
    16. Distinguish between a Contractionary and Expansionary Fiscal Policy
    17. Evaluate Macroeconomic conditions and determine the Fiscal Policy that can be used to improve those conditions
    18. Use a Keynesian 45° Total Expenditure Diagram to analyze economic problems and proposed solutions to those problems
    19. List and explain the complications encountered in employing Fiscal Policy 
     Supplemental Activities


    Some people "dream" of being #1, while others wake up everyday and "work hard"at it. Are you a dreamer or a hard worker?

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