Can I do this in one period instead of two?

Yes if your class already owns output gaps. Cut the multiplier derivation to the MPC = 0.8 case only and push the /practice set to homework. The AD slope and shifters plus one sandbox pass fit in 50 minutes.

What should students already know?

Unit 2 business-cycle vocabulary: potential output, recessionary and inflationary gaps, and the real-versus-nominal GDP distinction. Without output gaps, the graph reading in guided practice stalls. You also need 1:1 devices or a computer lab for the draw and sandbox segments; in a non-1:1 room, run those two teacher-projected to the whole class and keep the rest of the lesson device-free.

How should I grade the exit ticket?

One point each: three correct effects, correct call of movement-along with a valid reason, and $40B with a one-line explanation that some of the tax cut is saved. Two of three is passing; anyone at zero on the multiplier item repeats it in the next warm-up.

Lesson plans · AP Macro Unit 3 · MACRO 3.1, MACRO 3.2, MACRO 3.5, MACRO 3.6

Aggregate Demand: Components, the Three Effects, and the Multipliers

Essential question: What makes total spending in an economy rise or fall, and how far does one dollar of new spending move real GDP?

2 × 50-minute periods · MACRO 3.1, MACRO 3.2, MACRO 3.5, MACRO 3.6 · prints clean with Cmd/Ctrl+P

Objectives

Students will be able to list the four components of aggregate demand (C + I + G + Xn) and identify a real event that shifts each one.
Students will be able to explain the wealth, interest-rate, and net-export effects that make AD slope downward, without using single-market substitution logic.
Students will be able to distinguish a movement along AD (a price-level change) from a shift of AD (a change in a determinant).
Students will be able to calculate the spending multiplier (1/MPS) and tax multiplier (-MPC/MPS) and compute the resulting horizontal shift in AD.
Students will be able to draw a correctly labeled AD-SRAS-LRAS graph and identify whether the economy sits in a recessionary or inflationary gap.

Materials (all free, no student accounts needed)

Warm-up (8 min)

On the board: 'In one sentence, what is the difference between a recessionary and an inflationary gap?' Students write for two minutes, then cold-call three.
Post the module stat: real GDP fell from $15.6T (Q4 2007) to $14.4T (Q2 2009) and unemployment hit 10%. Ask which spending component (C, I, G, or Xn) collapsed first and take a quick hand vote for each letter.

Direct instruction (30 min)

Draw the axes yourself and narrate: price level on the vertical, real GDP on the horizontal. Stress these are economy-wide averages, not the price and quantity of one good.
Walk the three reasons AD slopes down with the module's examples: wealth effect ($50,000 in savings buys less), interest-rate effect (higher price level raises money demand and rates), net-export effect (US goods get relatively pricier).
Build a T-chart of AD shifters: confidence, government spending, taxes, Fed rate moves, foreign incomes and exchange rates. For each, ask a student left or right.
Derive the multipliers live: spending = 1/(1-MPC), tax = -MPC/(1-MPC). Do the MPC = 0.8 case: $10B of G shifts AD right $50B, a $10B tax cut shifts it $40B. Emphasize the tax multiplier is always one smaller in absolute value.
Show movement-along versus shift explicitly: a price-level change slides you along AD, everything else shifts it. Tell them this is a yearly FRQ point loss.

Guided practice (30 min)

Project /sandbox/adas with all three curves in long-run equilibrium and have the class confirm there is no gap.
Give the stock-market-boom scenario: call a student to drag AD right, then have the class read off the price level and real GDP and name the inflationary gap.
Run a contractionary case (consumer confidence collapses): cold-call a different student to drag AD left and identify the recessionary gap.
Switch to /frq-practice/draw and assign the 'Expansionary Fiscal Policy' and 'Household Income Tax Cut' scenarios; students draw on their devices and the tool checks the shift instantly. Circulate to confirm axes are labeled price level and real GDP.
Cold-call: 'MPC is 0.75 and G rises by $40B, how far does AD shift?' (multiplier 4, shift of $160B). One student shows the arithmetic on the board.

Independent practice (22 min)

Independently, students work through the /practice/aggregate-demand set, aiming to clear at least 8 items.
Two-part free-response: (a) draw a labeled AD-AS graph showing a recessionary gap, (b) given MPC = 0.9, calculate the minimum increase in government spending needed to close a $200B gap (answer: $20B).

Exit ticket

Name the three effects that make AD slope downward.
An economy's price level rises. Does AD shift, or do you move along it? Explain in one sentence.
With MPC = 0.8, how much does a $10B tax cut shift AD, and why is that less than $10B of spending?

Homework

Read the Aggregate Demand & Supply module on /macro/aggregate-demand and work the practice questions embedded in it.
On /frq-practice/draw, finish the AD-AS demand-side scenarios and screenshot two for tomorrow's warm-up.

Differentiation

For early finishers: assign the double-shift extension on /sandbox/adas (move AD and SRAS together) and ask which variable becomes indeterminate.
For multiplier strugglers: give a filled-in re-spending table ($10B, $8B, $6.4B, ...) and have them sum the first five rounds before using the formula.
For English learners: provide the AD-shifter T-chart pre-printed with the left and right column headers so they classify rather than generate.

Misconceptions to head off

Belief: AD slopes down because people buy substitutes when prices rise. Correction: there is no substitute for all domestic output, so the slope comes from the wealth, interest-rate, and net-export effects.
Belief: a higher price level shifts AD left. Correction: a price-level change is a movement along AD; only a determinant (C, I, G, Xn) shifts the curve.
Belief: the spending multiplier applies to a tax cut. Correction: use the tax multiplier -MPC/MPS, which is one smaller in absolute value because part of any tax cut is saved before it is spent.
Belief: the AD axes are price and quantity. Correction: they are the overall price level and real GDP, economy-wide aggregates.

Teacher FAQ

Can I do this in one period instead of two?: Yes if your class already owns output gaps. Cut the multiplier derivation to the MPC = 0.8 case only and push the /practice set to homework. The AD slope and shifters plus one sandbox pass fit in 50 minutes.
What should students already know?: Unit 2 business-cycle vocabulary: potential output, recessionary and inflationary gaps, and the real-versus-nominal GDP distinction. Without output gaps, the graph reading in guided practice stalls. You also need 1:1 devices or a computer lab for the draw and sandbox segments; in a non-1:1 room, run those two teacher-projected to the whole class and keep the rest of the lesson device-free.
How should I grade the exit ticket?: One point each: three correct effects, correct call of movement-along with a valid reason, and $40B with a one-line explanation that some of the tax cut is saved. Two of three is passing; anyone at zero on the multiplier item repeats it in the next warm-up.

Assign this without the grading

A free pilot semester gets you the teacher dashboard: assign the module and practice set from this plan, run lockdown exams, and see per-student progress. Students never pay either way.

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