Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define the MPC and the MPS and explain why they add up to 1. (Guide: “Marginal propensities: MPC and MPS”)
- I can define the expenditure multiplier and the tax multiplier and say which changes each one applies to. (Guide: “The two multipliers”)
- I can explain why a change in autonomous spending changes total spending and output by more than the first change. (Guide: “The idea”; Worked example 1(c))
Calculation
- I can calculate the MPC and MPS from changes in disposable income, consumption or saving. (Guide: Worked example 1(a); Practice Q3)
- I can calculate the spending and tax multipliers from the MPC or MPS. (Practice Q1, Q6(a))
- I can calculate the change in AD from a change in C, I, G or net exports, including a fall in spending. (Guide: Worked example 1(c); Practice Q5, Q7(a))
- I can calculate the change in AD from a change in taxes or transfers, with the correct sign. (Guide: Worked example 2(b); Practice Q2, Q7(c))
- I can work backwards from a target change in AD to the spending change or tax change needed. (Guide: Worked example 2(d); Practice Q6(b)–(c))
- I can calculate the combined effect of equal changes in spending and taxes. (Guide: Worked example 2(c); Practice Q6(e))
Reasoning
- I can explain why the spending multiplier is larger than the tax multiplier. (Guide: “Why the tax multiplier is smaller”; Practice Q4, Q6(d))
- I can explain how a higher MPC leads to a larger multiplier, using rounds of spending. (Practice Q5(d), Q7(b))
All ticked? Move on to Topic 3.3, Short-Run Aggregate Supply, or return to the course roadmap.