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AP Macroeconomics 3.2 Multipliers Questions

Calculate MPC, MPS, expenditure multipliers, and tax multipliers, then use them to estimate changes in aggregate demand and real GDP.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • calculate MPC and MPS from changes in consumption, saving and disposable income, using MPC + MPS = 1
  • calculate the expenditure multiplier from MPC or MPS and explain how either propensity changes its size
  • calculate the negative tax multiplier from MPC and compare its magnitude with the spending multiplier
  • apply the expenditure multiplier to government, investment, consumption or net-export changes
  • apply the tax multiplier to find the maximum change in aggregate demand or real GDP

Covered syllabus points

MOD-2.B—a. Define the expenditure multiplier, the tax multiplier, the marginal propensity to consume, and the marginal propensity to save.…

Question 1

[Maximum number: 1]

The table provided shows the quantities and unit prices of shirts, bread, and pants, the only three goods produced in the country of Middleland in 2021 and 2022. Assume that 2021 was the base year.

Table for Question 1 — AP Macroeconomics

Assume the marginal propensity to consume in Middleland is 0.8. Calculate the minimum change and state the direction of change in government spending required to close the output gap in the short run in Middleland. Show your work.

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