AP®︎ Macroeconomics: Topic 3.2 Flashcards

Master key terms and definitions for Topic 3.2 of AP Macroeconomics – Multipliers to help you prep for quizzes and the AP exam.

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Term

Multiplier Effect

Definition

An initial change in spending causes a larger overall change in real GDP.

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Multiplier Effect
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An initial change in spending causes a larger overall change in real GDP.

MOD-2.BMOD-2.B.1
Why The Tax Multiplier Is Smaller Than The Expenditure Multiplier
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Tax changes affect spending only through disposable income, so only the consumed portion is multiplied.

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Autonomous Expenditures
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Spending changes that occur independently of current real GDP and start the multiplier process.

MOD-2.BMOD-2.B.1
Marginal Propensity To Consume (MPC) And Marginal Propensity To Save (MPS)
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They are the fractions of each additional disposable income dollar spent and saved.

MOD-2.BMOD-2.B.5
Calculating MPC And MPS
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They equal changes in consumption and saving over disposable income, and together sum to one.

MOD-2.BMOD-2.B.5
Expenditure Multiplier
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It equals 1 divided by MPS, showing total real GDP change from autonomous spending.

MOD-2.BMOD-2.B.2
Tax Multiplier
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It equals negative MPC divided by MPS, showing real GDP change from taxes.

MOD-2.BMOD-2.B.3
Calculating Change In Real GDP With Multipliers
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Multiply the initial change by the multiplier; spending and GDP match, while taxes move oppositely.

MOD-2.B