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2.5 What determines the price level and equilibrium level of real output?

What students need to learn:

Students should be able to:
Additional Guidance Notes
Equilibrium level of output
Understand the concept of equilibrium real national output.
The ability to apply the AD/AS model to real-world situations will be expected.
The multiplier
Explain the size of the multiplier, using the concept of the marginal propensity to consume; apply the multiplier to shifts in AD.
Students should be able to explain the impact on the economy of the multiplier.
Evaluation points include the difficulty of measuring it; the time it takes to come into full effect and size of leakages.

Calculations using the multiplier formula will not be required.

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