AP Macro-Economics

Syllabus

Course Description

This course is a one-semester study of the principles of economics that apply to an economic system as a whole with particular emphasis on the study of national income and price determination, and also develop students’ familiarity with economic performance measures, economic growth and international economics. This course is taught to prepare students to take the College Board Advanced Placement Macro-Economics Examination and possibly receive college course credit. The course is rigorous, fast paced, and requires extensive reading.

Grading

Six weeks grades will be determined as follows:

Tests/Projects: 75%

Quizzes/Daily Assignments/Homework: 25%

There will be a test at the end of each instructional unit.

Quizzes will be given periodically-either announced or unannounced- in order to evaluate the students’ knowledge of the material on a day-to-day basis.

Texts

Economics: Principles, Problems, and Policies by Campbell R. McConnell and Stanley L. Brue; McGraw-Hill/Irwin; Boston; 2002

Units of Study

Unit 1-Basic Economic Concepts-

Economics: Principle, Problems, and Policies

Chapter 1,2, 3, & 4

Economic U$A: Resources and Scarcity: What is economics all about?

I. Basic economic concepts

A. Scarcity: the nature of economic systems

1. Scarcity and choice

a.rational behavior

b.marginalism: benefits and costs

2. The foundation of economics

a. unlimited wants

b. scarce resources

3. Economics: Production Possibilities Frontier, employment,

efficiency and growth

a. full employment using available resources

b. full production, using resources efficiently

c. construct and interpret production possibility schedules and

graphs.

B. Opportunity costs and production possibilities

1. Law of increasing opportunity costs

2. Allocative efficiency

C. Specialization, comparative advantage and exchange

D. The functions of any economic system, 3 economic questions

1. The circular flow model

2. The market system at work

3. Graph situations regarding how society’s answer economic questions.

E. Demand, supply and price determination

1. Law of demand

a. the demand curve

b. individual and market demand

c. determinants of demand

  1. illustrate graphically a change in demand versus a change in quantity demanded.

2. Law of supply

a. the supply curve

b. determinants of supply

  1. illustrate graphically a change in supply versus a change in

quantity supplied.

3. Supply and demand: market equilibrium

a. surpluses –graph and illustrate

b. shortages – graph and illustrate

c. equilibrium, rationing functions of prices

d. changes in supply and demand

e. the resource market

F. Pure capitalism and the market system

1. Capitalistic ideology

a. private property

b. freedom of enterprise and choice

c. role of self-interest

d. competition

e. markets and prices

f. limited government

2. The competitive market system

G. The market economy: private and public sectors

1. Households as income receivers

2. The business population

3. Economic functions of government

4. Government finances

a. government growth: purchases and transfers

b. federal finance

In this unit:

  • Students will be introduced to the economic concepts of scarcity, opportunity cost, and marginal analysis.
  • Students will learn and use the production possibility frontier and circular flow models.
  • Students will construct and interpret production possibility schedule and graph.
  • Students will participate in a simulation of the circular flow and will use the production possibility frontier to analyze the benefits of voluntary exchanges.
  • Students will use the market model to analyze changes in demand, supply, quantity demanded and quantity supplied.
  • Students will illustrate graphically a change in demand versus a change in quantity demanded.
  • Students will illustrate graphically a change in supply versus a change in quantity supplied, shortages and surpluses.
  • Students will understand characteristics of a capitalistic economy and analyze the households, firms and government as economic participants in capitalism.
  • Students will be able to determine comparative advantage, and the benefits from specialization and voluntary trades.

Unit 2 – Open Economy: International Trade and Finance-

Economics: Principle, Problems, and Policies

Chapters 6, 37, 38

Open Economy: International Trade and Finance

A. Balance of payments, international finance and exchange rates

1. the economic basis for trade

a. comparative advantage: graphical analysis

b. terms of trade

c. gains from trade

d. formulas

2. Supply and demand analysis of exports and imports

a. supply and demand in the United States

b. equilibrium world price, exports and imports

3. Trade barriers

a. economic impact of tariffs

b. economic impact of quotas

c. the case for protection, a critical review

i. diversification for stability

ii. infant industry argument

iii. costs of protectionism

4. Foreign currency markets

a. determinants of demand for foreign currency

b. supply of currency

c. exchange rate determination

1. currency appreciation

2. currency depreciation

5. Accounting Procedures

a. capital account

b. current account

c. balance of trade

6. Xn and capital flows

7. Links to financial and goods markets

In this unit:

  • Students will be able to determine absolute advantage and comparative advantage given a set of data.
  • Students will be able to use currency markets to evaluate changes in exchange rates and the impact on net exports.
  • Students can discuss trade from the viewpoint of free trade and protectionism.
  • Students will understand the balance of payments in terms of the

capital account and current account

Unit 3 Measurement of economic performance-

Economics: Principle, Problems, and Policies

Chapter 7 & 8

Measuring national output/income

A. National income accounts

1. Expenditure approach to GDP (Components of GDP)

2. Income approach to GDP

3. Other social accounts

a. net domestic product

b. national income

c. personal income

d. disposable income

e. circular flow revisited

4. Computing a GDP price index

a. nominal and real GDP

b. inflating and deflating GDP

5. GDP circular flow

a. resource direction

b. monetary direction

c. analyze relationships with the 4 cousins of GDP and how GDP

is calculated and how the flow is related.

B. Inflation measurement and adjustment

1. Measuring price level

a. implicit GDP price deflator

b. consumer price index and producer price index

2. Redistributive effect of inflation

a. fixed-nominal-income receivers

b. savers, debtors, and creditors

c. anticipated inflation

C. Unemployment

1. The business cycle

a. the historical record

b. phases of the cycle

c. causation

2. Types of unemployment

a. defining "full employment", natural rate of unemployment

b. measuring unemployment

c. economic cost of unemployment

d. noneconomic costs

e. international comparisons

In this unit:

  • Students will be able to calculate GDP from the expenditure approach and the income approach.
  • Students will understand the difference between nominal numbers and real numbers.
  • Students will interpret and graph circular flow of economic activity.
  • Students will graph phases of the business cycle.
  • Students will be able to explain the patterns of economic activity known as the business cycle and analyze the types of economic instability that occurs.
  • Students will be able to differentiate between types of unemployment and categorize situations.
  • Students understand the concept of the natural rate of unemployment in an economy.
  • Students will understand the construction of a price index.
  • Students will be able to calculate price index numbers and rates of inflation.
  • Students will be able to evaluate the impact of unexpected inflation on economics decisions.

Unit 4- National Income and Price Determination-

Economics: Principle, Problems, and Policies

Chapter 9 & 11

National Income and price determination

A. Aggregate demand

1. Circular flow

2. Changes in equilibrium GDP and the multiplier

a. deriving the aggregate demand curve from the aggregate

expenditures model

b. determinants of aggregate demand

1. international trade and equilibrium output

2. personal consumption

3. investment

4. government

c. aggregate demand shifts and the aggregate expenditure

model

d. multiplier and crowding out effects

B. Aggregate supply

1. Classical analysis (flexible prices)

2. Keynesian analysis, Aggregate expenditures model

3. Rational expectations

a. natural rate hypothesis

b. rational expectations theory

4. Aggregate supply curve and determinants of aggregate

supply

a) Long run aggregate supply

b) Short run aggregate supply (nominal wage inflexibility)

C. Macroequilibrium (RDO and PL)

a) Short run (actual output)

b) long run (potential output at full employment)

c) actual vs. full employment output

d) Economic fluctuations and adjustments to full

employment- utilization of resources

In this unit:

  • Students will be able to tell why AD slopes down and AS slopes down.
  • Students will be able to the 4 shifters of AD and 3 shifters of AS.
  • Students will graph and interpret an investment demand curve.
  • Students will be able to do FRQ’s relating to the AD/AS graph, interpret and graph each situation involving long run and short run AS.
  • Students will be able to distinguish between the theories of the Classicals and Keynesians.
  • Students will know the contributions of Classical economists.
  • Students will differentiate between SRAS and LRAS.

Unit 5 – Financial Sector-

Economics: Principle, Problems, and Policies

Chapter 13, 14, 15

Financial Sector

A. Money and banking and financial markets

1. Definition of money and its creation

a. functions of money

b. what backs the money supply?

1. money as debt

2. value of money (present and future value)

3. money and prices

4. measures of the money supply

c. maintaining money’s value

d. the United States financial system. financial assets

e. money market(money demand and supply and

nominal interest rates)

f. bond market

g. loanable funds market (real interest rates)

h.stock markets and other personal investments

2. How banks create money

a. the banking system, multiple deposit expansion

b. the banking system’s lending potential, the money

multiplier

3. Central Bank and control of the Money Supply

a. goals of monetary policy

b. tools of monetary policy

1. open-market operations

2. the reserve ratio

3. the discount rate

c. easy money and tight money

d. monetary policy, real GDP and the price level

e. monetary policy and aggregate supply

f. strengths of monetary policy and the shortcomings and

problems

4. Quantity Theory of Money

a. MV=PQ

b. monetarism

In this unit:

  • Students will understand the components of the money market and use the model for analysis of monetary policy.
  • Students will know the functions, characteristics and sources of value for money.
  • Students will know the components of the measures of the money supply.
  • Students will be able to explain the structure and functions of the Federal Reserve System.
  • Students will be able to calculate expansion of the money supply.
  • Students will be able to apply the tools of monetary policy to types of economic instability.

Unit 6 – Inflation, Unemployment and Stabilization Policies-

Economics: Principle, Problems, and Policies

Chapter 12,16, 18

Inflation, Unemployment and Stabilization Policies

A. Fiscal and monetary policies

1. Interaction of fiscal and monetary policies

2. Monetarist-Keynesian controversy

3. Fiscal Policy

Demand side

a. discretionary fiscal policy

b. financing deficits and disposing of surpluses

c. policy options: government spending or taxation?

d. non-discretionary fiscal policy: built in stabilizers

e. supply side fiscal policy

4. Budget deficits and the public debt

a. Deficits and debt definitions

b. annually balanced budget

c. cyclically balanced budget

d. functional finance

e. The public debt, facts and figures

i. causes-quantitative aspects

ii. economic implications, shifting burdens

f. Implications and issues

i. income distribution

ii. incentives

iii. external debt

iv. curb on fiscal policy

v. crowding out and stock of capital

g. Recent federal deficits

i. budget deficits and trade deficits

ii. higher interest rates

iii. dollar appreciation

B. Inflation and unemployment

1. demand pull inflation

2. cost push inflation and unemployment

3. Phillips Curve (short run and long run)

4. role of expectations

In this unit:

  • Students will use the aggregate expenditure model to determine macroeconomic equilibrium.
  • Students will understand the expenditures multiplier and tax multiplier
  • Students will differentiate between short run and long run aggregate supply.
  • Students will understand demand management fiscal policy and supply side fiscal policy.
  • Students will be able to explain the linkage between fiscal policy and crowding out in the loanable funds market.
  • Students will graph money market and loanable funds.
  • Students will be able to explain the linkages between fiscal policy and net exports.

Unit 7 – Economic Growth and Productivity

Economics: Principle, Problems, and Policies

Chapter 17

Economic Growth and Productivity

1. Growth economics

a. growth as a goal

b. arithmetic of growth

c. ingredients of growth

2. United States growth

a. accounting for growth

b. inputs versus productivity

c. quantity of labor

d. technological advance

e. quantity of capital (investing in physical capital)

f. education and training (investing in human capital)

g. resource economics and scale economics

h. research and development

3. Growth policies

4. Aggregate demand, instability and growth

In this unit:

  • Students will understand the difference between LRAS and SRAS and know the determinants of each.
  • Students will be able to relate SRAS to the SR Phillips Curve.
  • Students will know the determinants of economic growth and be able to illustrate economic growth with a model.
  • Students will be able to explain the difference between budgets deficits and national debt.
  • Students will understand the various macroeconomic theories and be able to explain the characteristics of each.
  • Students will understand the monetarist equation of exchange and the monetary rule.