South Monterey County Joint Union High School District

SOUTH MONTEREY COUNTY JOINT UNION HIGH SCHOOL DISTRICT ALL ITEMS IN ITALICS ARE TO BE ELIMINATED AND/OR REPLACED WITH TEACHER SPECIFIC INFORMATION MICRO/MACRO ECONOMICS COURSE SYLLABUS

1. NAME AND CONTACT INFORMATION: Tige Munoz 831-385-5461 ext. 1182 King City High School [email protected]

2. COURSE OBJECTIVES; BASED ON THE COMMON CORE STANDARDS: The students will be able to understand and explain how both the micro and macro economy work. They will be able to utilize various models and theories to solve real world problems, while dealing with real world constraints and using cost benefit analysis.

3. COURSE DESCRIPTION: Micro Economics is a semester study of how individuals, firms, and organizational structures make economic decisions. Demand and supply analysis will be developed to demonstrate how market prices are determined; how they determine an economy’s allocative mix of goods and services and factors of production; and how goods and services are distributed throughout the economy. We will evaluate the strengths and weaknesses of economic decision-makers by employing concepts of efficiency and equity. We also analyze and evaluate the effects of government intervention. Throughout the course, learning emphasis is placed on reasoned, logical argument. The purpose of this course is not to develop or solicit a normative or political point of view, but rather to use economics as a method and model for decision- making.

Macro Economics is a semester study of how economic decision-makers affect the economy as a whole in terms of employment, price stability, and economic growth. After defining and analyzing tools and models that describe the conditions of our national economy, our fundamental purpose will be to analyze how fiscal and monetary policies may be used to promote full employment, price stability, and economic growth. Competing economic theories and models will be used to test the conventional Classical and Keynesian conclusions. While international economics formally concludes our study in Macro Economics, we shall attempt to integrate international topics through the entire course as we assume a complete economy in dealing with macro problems. Moreover, throughout the course, learning emphasis is placed on reasoned, logical argument.

4. CLASSROOM CODE OF CONDUCT: a. The student will adhere to all school rules and district policies as summarized in the Parent handbook. b. The student will follow the “Golden Rule”

5. GRADING SCALE: Administrative Regulation (AR) 5121 (a) Grades for each grading period as follows: A Outstanding Achievement 4.0 grade points B Above Average Achievement 3.0 grade points C Average Achievement 2.0 grade points D Below Average Achievement 1.0 grade points F Little or no Achievement 0 grade points I Incomplete 0 grade points An Incomplete shall be given only when a student’s work is not finished because of illness or other excused absence. If not made up, the Incomplete shall become an F.

(For Advanced Placement courses only) Because of the more rigorous nature of Advanced Placement, honors, and concurrent postsecondary courses, students receiving a grade of A, B, or C in those courses shall receive extra grade weighting as follows: A Outstanding Achievement 5.0 grade points B Above Average Achievement 4.0 grade points C Average Achievement 3.0 grade points Board Policy 5121 (b)

Effect of Absences on Grades:

If a student misses class without an excuse and does not subsequently turn in homework, take a test, or fulfill another class requirement which he/she missed, the teacher may lower the student’s grade for nonperformance, based on the value of the missed assignment.

The Board believes that 5 unexcused absences per grading period constitute excessive unexcused absences. Students with excessive unexcused absences may receive a failing grade and not receive credit for the class (es).

Students and parents/guardians shall be informed by the teachers if class credit is withheld due to excessive unexcused absences. Each time an unexcused absence occurs the student and parent/guardian shall again be notified of the district’s policy regarding excessive unexcused absences. When a student has 4 unexcused absences a phone call and/or meeting will be arranged by the teacher with the parent/guardian.

La política del Consejo 5121

Efecto de las ausencias en las calificaciones:

Si un estudiante falta a clase sin una excusa y posteriormente no entrega la tarea, tomar una prueba, o cumplir con un requisito más de la clase que él / ella fallo, el profesor puede bajar la calificación del estudiante por incumplimiento basado en el valor de la asignación perdida.

La Junta cree que 5 ausencias injustificadas por período de calificaciones constituyen en excesivas ausencias injustificadas. Los estudiantes con ausencias excesivas sin excusa pueden recibir una calificación reprobatoria y no recibirá crédito por la clase (es).

Los estudiantes y los padres o tutor deberán ser informados por los profesores de clase si el crédito se retiene debido a las excesivas ausencias injustificadas. Cada vez que se produce una ausencia injustificada del alumno y los padres / tutores serán notificados una vez más de la política del distrito con respecto a excesivas ausencias injustificadas. Cuando un estudiante tiene 4 ausencias injustificadas una llamada telefónica y / o una reunión será organizada por el profesor con los padres / tutores. Creemos que los padres necesitan estar conscientes de esto y entender esta política porque podría tener un tremendo impacto en su grado de su hijo.

6. ASSESSMENTS/ASSIGNMENTS: Currently planned, but subject to change based on the needs of the students. Formal assessments will come in the form of short answer, multiple choice questions, free response questions, presentations, and short essays.

7. SPECIAL CIRCUMSTANCES: Plagiarism and cheating will result in an F on the assignment.

8. CLASS EXPECTATIONS – LEVEL OF RIGOR: This is an Advanced Placement class that will require the students to work at an expected college freshman level of a top Universty.

9. MATERIALS RESOURCES PROVIDED: a. Gwartney, James D; Stroup, Richard L; Sobel, Russel; and Macpherson, David A. Economics: Private and Public Choice. (11th Edition). Thomson, Southwestern, 2006. ISBN: 0-324-20564-3Any links for success in the course b. Aditional books to be used Sowell, Thomas. Basic Economics: A Citizen’s Guide to the Economy. (Revised and Expanded Edition). Basic Books, 2004. ISBN: 0-465-08145-2.

Miller, Roger LeRoy, Benjamin, Daniel K., North, Douglass C. The Economics of Public Issues. (14th Edition). Pearson Education, Inc., 2005. ISBN: 0-321-30349-0

Morton, John S. and Goodman, Rae Jean B. Advanced Placement Economics. (3rd Edition). National Council on Economic Education, 2003. ISBN: 1-56183-566-8

c. Websites – Reffonomics.com (Effective 7/1/12)

Detail Syllabus for Advanced Placement Micro Economics

July 2007

Course Title: AP Micro Economics is designated in our school system as AP Micro Economics Curricular Requirements Page CR1 – Basic Economic Concepts 3

CR2 – The Nature and Function of Product Markets 4

CR3 – Factor Markets 11

CR4 – Market Failure and the Role of Government 13

CR5 – Understanding of Economic Decision-Making and its factors such as marginal analysis and opportunity cost 3-14

CR6 – Generate, Interpret, Label, and Analyze Graphs, Charts, and Data to Describe Economic Concepts 3-14

Course Description:

Micro Economics is a semester study of how individuals, firms, and organizational structures make economic decisions. Demand and supply analysis will be developed to demonstrate how market prices are determined; how they determine an economy’s allocative mix of goods and services and factors of production; and how goods and services are distributed throughout the economy. We will evaluate the strengths and weaknesses of economic decision-makers by employing concepts of efficiency and equity. We also analyze and evaluate the effects of government intervention. Throughout the course, learning emphasis is placed on reasoned, logical argument. The purpose of this course is not to develop or solicit a normative or political point of view, but rather to use economics as a method and model for decision-making.

School Organization:

The school district’s instructional organization is mandated by two semesters. The curriculum of the College Board’s Advanced Placement (AP) Economics is a year-long class. The syllabus submitted represents the year-long AP Micro Economics sequence.

Text:

Gwartney, James D; Stroup, Richard L; Sobel, Russel; and Macpherson, David A. Economics: Private and Public Choice. (11th Edition). Thomson, Southwestern, 2006. ISBN: 0-324-20564-3.

 Readings and assignments are indicated in syllabus and are cited as Gwartney Additional Instructional Sources:

Sowell, Thomas. Basic Economics: A Citizen’s Guide to the Economy. (Revised and Expanded Edition). Basic Books, 2004. ISBN: 0-465-08145-2.

Miller, Roger LeRoy, Benjamin, Daniel K., North, Douglass C. The Economics of Public Issues. (14th Edition). Pearson Education, Inc., 2005. ISBN: 0-321-30349-0

Morton, John S. and Goodman, Rae Jean B. Advanced Placement Economics. (3rd Edition). National Council on Economic Education, 2003. ISBN: 1-56183-566-8 Syllabus – Advanced Placement Micro Economics

AP Outline/Skill Specific Teacher/ Learner Readings/Problems/Assignments Development Tasks I. Basic economic 1. Use the production Read. concepts (8-14%) possibilities frontier to Gwartney. illustrate the economic  Chapter 1, “The Economic A. Scarcity, problem. Approach”; choice and opportunity  Topic: Production  Chapter 2, “Some Tools of the possibilities Economist” frontier Miller cost  Scarcity, choice,  Chapter s 1, 2, 3, 4,29,31,32 cost Sowell B. Production  Free lunches vs.  Chapters 1, 19 possibilities curve trade offs Essential Questions 2. Calculate opportunity cost. 1. What are the economic goals of any C. Comparative  Topic: Opportunity society? advantage, cost  Increasing vs. 2. How does a production possibilities constant cost model illustrate the economic problem of specialization, and trade 3. Define efficiency and scarcity, choice, and cost? describe an efficient use of D. Economic resources. 3. What are the guideposts to economic systems  Topic: Efficiency thinking?  Technical or E. Marginal productive 4. Why do people trade? analysis efficiency  Allocative Sample Activities Mathematical/Graphical Skills efficiency 4. Explain how people gain  Morton, Unit I  Graph a production Sample AP Economics Test Question possibility model from specialization and trade.  Explain the shapes of the  Topic: Specialization  2003 Interpret PP on two production possibilities countries; determine curves.  Absolute vs. comparative absolute/comparative advantage  Explain how the production advantage and terms of trade; determine possibilities model shows  Gains from trade exports/imports and explain scarcity, choice, and cost. benefits of trade.  Interpret selected points on 5. Explain how technological the production possibilities change and increases in model. capital and human capital expand production  Explain and show economic possibilities. growth on the production  Topic: Economic growth possibility models and the ppf  Explain and show the affects of trade on a production possibility model.  Calculate opportunity cost  Calculate terms of trade and gains from trade

Chief Reader Formative Signals: I. Basic Economic Concepts

1. Solve comparative advantage problems using inputs constant with outputs varying AND with outputs constant and inputs varying. 2. Understand and calculate terms of trade 3. Apply the concepts of marginal analysis -- ‘thinking like an economist’ 4. Apply production possibilities concepts to long run growth models AP Outline/Skill Development Specific Teacher/ Readings/Problems/Assignment Learner Tasks s II. The nature and functions of product 1. Distinguish Read: Gwartney: between quantity  Chapter 3, “Supply, markets (55-65%) demanded and Demand, and the Market demand and Process;” A. Supply and demand (15- explain what  Chapter 4, “Supply and determines 20%) Demand: Applications demand. 1. Market equilibrium and Extensions;”  Law of Determinants of supply and Chapter 19, “Consumer 2. demand  demand Choice and Elasticity.”  Changes Price and quantity controls 3. in demand  Chapter 5, “Difficult Cases for the Market and 4. Elasticity Normal  the Role of Government.” a. Price, income, and vs. inferior Miller cross-price elasticity of goods  Chapters 5,6,10,11,12 demand 2. Distinguish Sowell b. Price elasticity of between quantity supply supplied and  Chapters 2,3,4 5. Consumer surplus, producer supply and Sample Activities surplus, and market efficiency explain what 6. Tax incidence and deadweight determines  Morton, Unit II supply. loss B. Theory of consumer choice (5-10%)  Topic: Law of supply Essential Questions: a. Total utility and marginal utility  Changes in supply b. Utility maximization: equalizing 1. What factors affect quantity marginal utility per dollar 3. Explain how demanded (Demand)? demand and 2. What factors affect quantity Mathematical/Graphical Skills supply determine supplied (Supply)? price and quantity 3. Why is equilibrium important in a  Graph demand and supply showing in a market and market economy? equilibrium price and quantities explain the  Given novel changes in demand and /or effects of 4. How do government price ceilings, supply, graph the changes and show the changes in supports, and taxation affect changes in equilibrium price and demand and equilibrium price and quantity? quantities. supply. 5. What is the price elasticity of  Graph effects of a price ceiling and price  Topic: Law of demand and what factors floor market determine elasticity? forces  Graphically illustrate changes in demand 6. How is total revenue related to the and supply with those of changes in  Laws of price elasticity of demand? quantity demanded and quantity supply and 7. What is income elasticity? What supplied. demand are normal goods? What are  Calculate shortages/surpluses form  Shortages inferior goods? novel data vs. surpluses 8. What is the price elasticity of  Calculate price, income, and cross  Effects of supply? elasticity given novel data and interpret changes in 9. What is marginal utility and how mathematical relationships and elasticity supply/dema does in determine what nd  Graph and differentiate an inelastic from consumers will buy? elastic demand curve and the affects on 4. Define, explain 10. What does the equi-marginal total revenues the factors that principle predict about consumer  Given various elasticity of demand and a influence, and choice? calculate the price change in supply, graph and explain the 11. Do all consumers receive a elasticity of effects on price and quantity consumer surplus when they demand.  Graph and illustrate the tax burden given purchase a product?  Topic: Price an elastic and inelastic demand curve. elasticity of  Explain why the Mu/Pa at one point on demand Sample AP Economics Test the demand curve is higher/lower than  Midpoint another. Question formulas  Explain and illustrate consumer surplus AP Outline/Skill Development Specific Teacher/ Readings/Problems/Assignment Learner Tasks s  Calculate MU data from total utility data  Elastic vs.  Determine consumer equilibrium from inelastic vs. novel price, income and MU data unitary  1996, supply and demand  Elasticity and analysis of tickets with total inelastic supply curve and revenues effects of a price ceiling on markets 5. Define, explain the factors that  2005B, explains effects of influence, and government subsidies on a calculate the price specific good; explains how elasticity of the price changes of good supply. effects changes in a complements and the effects  Topic: Price on total revenues given price elasticity of supply elasticity.  Elastic vs. inelastic supply 6. Define and explain the factors that influence the cross elasticity of demand and the income elasticity of demand.  Topic: Cross elasticity of demand  Formula to compute  Substitutes (+)  Complement s (-)  Income elasticity & normal vs. inferior goods 7. Explain how ceilings create a shortage, and inefficiency  Topic: Price ceiling 8. Explain how the minimum wage creates unemployment, inefficiency, and unfairness.  Topic: Price floor 9. Explain how production quotas create inefficiency and unfairness. AP Outline/Skill Development Specific Teacher/ Readings/Problems/Assignment Learner Tasks s

 Topic: Production quota* 10. Distinguish between value and price and define consumer surplus.  Topic: Marginal benefit 11. Distinguish between cost and price and define producer surplus.  Topic: Cost versus price 12. Describe the effects of sales taxes and excise taxes, determine who pays these taxes, and explain why taxes create inefficiencies, (deadweight loss)  Topic: Tax incidenc e 13. Explain marginal utility theory and use it to derive a consumer’s demand curve.  Topic: Utility

Chief Reader Formative Signals:

1. Distinguish between elastic and inelastic demand and supply 2. Know how to impose an effective price ceiling and how to interpret graphs with ceilings/floors 3. Apply elasticity concepts to macro economic policies (investment and money demand); the effects of fiscal and monetary policy given various elasticity 4. Understand difference between supply and quantity supplied 5. Explain relationship between price and total revenues 6. Understand consumer surplus 7. Apply utility maximizing rule or explain the marginal utility per dollar rule AP Outline/Skill Development Specific Teacher/ Learner Readings/Problems/Assignments Tasks C. Production and costs (10- Read: Gwartney 15%) 1. Explain how economists measure a firm’s cost of production and profit.  Chapter 20, “Costs and 1. Production functions: Supply of Goods” short and long-run  Topic: Firm’s Miller 2. Marginal product and goal diminishing returns  Accounting cost  Chapter 20 3. Short run costs  Economic cost Sowell 4. Long run costs and  Implicit cost  Chapter 5 economies of scale  Explicit cost Essential Questions: 5. Cost minimizing input 2. Explain the relationship combination 1. Why are economic profits a better D. Firm Behavior and Market between a firm’s output and labor employed in the short basis for decision making than Structure (25- run. accounting profits? 2. How does the short run differ from 35%)  Topic: Short run the long run?  Long run 3. What is the law of diminishing 1. Profit:  Total product returns and what does it imply about a. Accounting versus  Marginal product production and cost in the short run? economic profits  Average product 4. What are the relationships among b. Normal profit AFC, ATC, AVC and MC?  Increasing c. Profit maximization: marginal returns 5. What differentiates short run cost from long run cost? MR=MC rule  Decreasing Mathematical/Graphical Skills marginal returns Sample Activities  MP and AP  Graph total, marginal relationships  Morton, Unit III and average output Sample AP Economics Test Question  Show point of 3. Explain the relationship diminishing returns on between a firm’s output and  1998, explains relationship graph of production costs in the short run. between AP and MP given function  Total cost data; describes relationship  Graph cost: total,  Fixed cost between cost and production; variable, fixed. identifies law of diminishing  Variable cost  Graph cost: average marginal returns  Marginal costs total, average  2005B ,from a graph identifies variable, average fix,  ATC, AFC, AVC ATC, AVC, MC and can deduce and marginal  MC and MP fixed cost; explains effects of  Identify points of relationships specialization and then diminishing returns on  SR cost curve diminishing returns as it relates to MC; explains why AFC cost graphs relationships  Graph and explain declines as output decreases; short run and long run 4. Derive and explain a firm’s and can derive points on s short average cost curves. long-run average cost curve. run supply curve from the MC curve  Given changes in  Topic: variable, and fixed Economies of cost, illustrate scale changes on a short  Diseconomies of run cost curves. scale  Show how a short run  Long run supply curve is average cost derived from marginal curves cost curves.  Calculate MP, TC, TFC, TVC, AFC, AVC, ATC, and MC

 Interpret relationships AP Outline/Skill Development Specific Teacher/ Learner Readings/Problems/Assignments Tasks

between and among cost curves. Chief Reader Formative Signals:

1. Understand when firms are operating efficiently 2. Compare and contrast efficiencies of monopoly and competitive firms. 3. Know and distinguish between allocative efficiency (p=mc) and technological (productive) efficiency (p=min ATC) 4. Differentiate between short run and long run equilibrium in competitive model (LR = p=min ATC) 5. Illustrate firm and industry by using side-by-side graphs 6. Illustrate areas of losses/profits 7. Distinguish between competitive input market (elastic labor supply) with competitive output market (elastic demand curve) AP Outline Specific Learning Tasks Sample Problems 2. Perfect competition 1. Explain a perfectly competitive Read: Gwartney firm’s profit-maximizing choices a. Profit maximization and derive its supply curve.  Chapter 21, "Price b. Short-run supply and  Definition Takers and the Competitive Process. shutdown decision  Firm's goal c. Firm and market Miller Price-taking, elastic behaviors in short-run  and long run demand; marginal  Chapter 15 revenue equilibrium Sowell d. Efficiency and perfect  Profit maximization competition 2. Explain how output, price, and  Chapter 6 profit are determined in the Essential Questions: Mathematical/Graphical Skills short run Graphically differentiate between  Market supply 1. How do firms apply the the demand in a  Short run equilibrium principles of marginal cost to competitive industry  Economic profit; zero determine how much to (market) from a profit; minimizing supply competitive firm. losses 3. What decisions must firms 3. Explain how output, price, and must firms make in the short Graphically illustrate an individual profit are determined in the run and what criteria do they long run. firm’s short run profit use for short run decisions? maximization price and  Exit/Entry 4. What decisions must firms output; short run  Long run equilibrium make in the long run and what criteria would they use to minimization of losses; and Efficiencies; p=min ATC;  make long run decisions? shut down p=mc 5. What conditions comprise the Graph a perfectly competitive firm in pure competition model? long run equilibrium. 6. How do firms in competitive markets make short run and Illustrate how a short run supply long run decisions? curve is derived from 7. How do short run and long run individual firms. equilibrium differ in competitive markets? Illustrate a long run adjustment 8. In what ways do competitive given an markets foster allocative and increase/decrease in technical efficiency? demand for a product. Sample Activities

Use side by side graphs of firm vs.  Morton, Unit III industry in a competitive Sample AP Economics Test market. Question

Show how changes in supply and  2003, using side by side demand affects graphs of industry and competitive firm in the firm with SR excessive short run and long run. profits, show price and output and shade economic profits; show long run industry firm adjustments  1991, how a competitive firm determines output and what happens when variable cost increases

Chief Reader Formative Signals: 1. Know and distinguish between allocative efficiency (p=mc) and technological (productive) efficiency (p=min ATC) 2. Differentiate between short run and long run equilibrium in competitive model (LR = p=min ATC) 3. Illustrate firm and industry by using side-by-side graphs 4. Illustrate areas of losses/profits AP Outline Specific Learning Tasks Sample Problems 9. Monopoly 1. Explain how monopoly arises Read: Gwartney a. Sources of market and distinguish between  Chapter 23, "Price power single-price monopoly and Searchers with High price-discriminating monopoly. Entry Barriers" b. Profit maximization  Features/definition Miller c. Inefficiency of  Barriers to entry  Chapters 16,18 monopoly  Natural monopoly Essential Questions d. Price discrimination  Price & output strategies 1. What conditions comprise the Mathematical/Graphical Skills 2. Explain how a single-price model of pure monopoly? monopoly determines its 2. How does a monopolist  Graph and illustrate a profit output and price. determine price and output? maximizing output and 3. What forces prevent a price for a monopolist  Short run determination of monopolist from charging any  Graph and illustrate a short output and price and profits price it wants? run loss for monopolist. 4. How does market power  Show how demand, total  Marginal revenue and elasticity enable a monopoly to revenue and marginal increase revenues through revenue are related for a 3. Compare the performance of price discrimination? typical monopolist. single-price monopoly with that 5. In what ways do monopoly of perfect competition.  Graph a natural monopoly markets create allocative and and show the affects of  Output and price technical inefficiencies? government regulation comparisons 6. How does a perfect (average cost pricing and  Efficiency comparisons competition model compare marginal cost pricing)  Deadweight loss with that of a monopolist  Graph how a monopolist model in terms of output, can discriminate in the final 4. Explain how price price, profits, and efficiency? sale of its product discrimination increases profit. Sample Activities  Price discrimination 5. Explain how monopoly  Morton, Unit III regulation influences output, Sample AP Economics Test price, economic profit, and Question efficiency.  Average cost pricing  2003, draw monopoly  Marginal cost pricing graph showing price, output and profits; distinguish between MR and D of monopoly; indicate consumer surplus and deadweight loss  2003B , using graphs, compare and contrast short run profits of perfect competition with that of a monopoly including the relationship between price and marginal revenue and economic profits in the long run; show and explain deadweight loss.

Chief Reader Formative Signals:

1. Explain why marginal revenue curve lies below the demand curve 2. Explain difference between marginal revenue for competition and marginal revenue for a monopoly 3. Know and distinguish between allocative efficiency (p=mc) and technological (productive) efficiency (p= min ATC) and why monopoly is inefficient 4. Compare and contrast efficiencies between monopoly and competition models AP Outline Specific Learning Tasks Sample Problems 10. Oligopoly 1. Describe and identify Read: Gwartney. a. Interdependence, collusion, oligopoly and explain how it and cartels arises.  Chapter b. Game theory and strategic  Definition/features of 22, "Price-Searcher Markets with Low behavior 2. Explore the range of possible Entry Barriers Monopolistic competition price and quantity outcomes 11. Miller a. Product differentiation and and describe the dilemma role of advertising faced by firms in oligopoly.  Chapter  Monopoly outcomes b. Profit maximization s 17,19 c. Short run and long-run  Duopolies Essential Questions: equilibrium 3. Use game theory to explain d. Excess capacity and how price and quantity are inefficiency determined in oligopoly.  Game theory 1. What does the model of Mathematical/Graphical Skills monopolistic competition  Nash equilibrium  Graph and explain the monopolistic have in common with the competition  Prisoner's dilemma models of pure competition and pure monopoly?  Graph and explain the price and  Payoff matrix 2. How does monopolistic output in the case of oligopoly  Dominant strategies competition affect  Graph and explain the regulation of  Repeated games efficiency? a monopolist 4. Describe and identify 3. What does the model of  Create game theory matrixes to monopolistic competition. oligopoly have in common explain Nash equilibrium  Definition/features of with the models of pure  Use side by side graphs to illustrate competition and pure comparisons and contrast of  Product differentiation monopoly? monopolistic competition with pure  Four firm concentration 4. How does oligopoly affect monopoly and/or pure competition. ratio efficiency?  Herfindahl-Hirschman 5. What is game theory and Index how does it predict 5. Explain how a firm in consequences? monopolistic competition Sample Activities determines its output and price in the short run and the  Morton, Unit III long run Sample AP Economics Test  Demand and marginal Question revenue curves 2004, Analysis of output and  Output and price rule pricing in monopolistic  Long run equilibrium competitive firm in long run  Efficiency equilibrium; Analyzes effects of entry and fixed cost increase  Excess capacity 6. Explain why advertising costs are high and why firms use brand names in monopolistic competition.  Advertising; effects of AP Outline Specific Learning Tasks Sample Problems III. Factor Markets (10- 1. Describe composition of the Read: Gwartney 18%) markets for labor, capital, and land.  Chapter 24, "The A. Derived factor demand  Factors of production, Supply and Demand for B. Marginal revenue definition Productive Resources" product  Entrepreneurship  Chapter 25, "Earnings, C. Labor market and firms’ Productivity, and the  Human capital Job Market hiring of labor D. Market distribution of  Labor markets  Chapter 26, income  Financial capital/markets "Investment, the Capital Market, and the 2. Explain how the value of Wealth of Nations" Mathematical/Graphical Skills marginal product determines the  Special Topic 11, "Do  Graph and explain the demand for a factor of production. Labor Unions Increase demand and supply of a the Wages of resource  Derived demand Workers?"  Graph how equilibrium  Marginal revenue product Miller wage rates are determined in a competitive and in an  Value of marginal revenue  Chapter 13 imperfect market product (monopsony)  Demand curve for labor for Sowell  Graph the affects of a single firm minimum wage laws or  Profit maximization and  Chapters 9,10 where unions have hiring rule Essential Questions: negotiated wage rates 3. Explain how wage rates and above equilibrium price. employment are determined. 1. How do principles of choice  Graph rent and interest apply to the decision buy rates and explain how  Supply of labor resources? equilibrium rates are  Demand for labor for 2. What factors affect demand and achieved market supply of resources?  Labor market equilibrium 3. Why do the conditions of 4. Explain how interest rates, competition in resource markets borrowing, and lending are promote allocative efficiency? determined. 4. What factors promote efficiency  Demand for financial capital of resources? 5. In what ways do markets for  Supply of financial capital capital resources differ from  Loanable funds market markets of other resources?  Interest rate determination 6. How do interest rates affect and interest rate demand for capital resources? fluctuations Sample Activities 5. Explain how rents and natural resource prices are determined  Morton, Unit IV  Demand for land Sample AP Economics Test Question  Supply of land  Economist conception of  2003B, given a rent production function table, 6. Describe the inequality in determine number of income and wealth in the United workers hired using States and explain why wealth marginal analysis. Show inequality is greater than income and explain how a wage inequality. rate increase and an  Inequality in the U.S. increase in the price of  Median incomes the product changes  Lorenz curve profits, number of people hired  Wealth and income distribution AP Outline Specific Learning Tasks Sample Problems

 Poverty 7. Explain how economic inequality arises  Demand for skilled labor  Demand for low skilled labor  Supply of labor  Discrimination  Sex and race earning differentials 8. Explain the effects of taxes, Social Security, and welfare programs on economic inequality  Income redistribution  Taxation policies  Income maintenance programs AP Outline Specific Learning Tasks Sample Problems IV. Market Failure and the 1. Explain why negative Read: Gwartney Role of externalities lead to inefficient overproduction and how  Chapter 5, "Difficult Government (12- property rights, pollution Cases for the 18%) charges, or taxes can achieve Market, and the Role a more efficient outcome. of Government" 1. Externalities  Externalities  Chapter 6, "The a. Marginal social benefit  Private cost vs. social cost Economics of Collective Decision and marginal social  External cost Making cost  Marginal social costs  Chapter 27, "Income b. Positive externalities Inequality and c. Negative externalities  Marginal benefits vs. marginal social costs Poverty. d. Remedies Miller  Coarse theorem 2. Public goods Property rights a. Public versus private   Chapters 24,25,28 goods  Government actions with Sowell b. Provision of public external costs goods  Taxation  Chapters 7,8 3. Public policy to promote  Marketable permits Essential Questions: competition 2. Explain why positive a. Antitrust policy externalities lead to inefficient 1. Why does government b. Regulation underproduction and how intervene in the economy? 4. Income Distribution public provision, subsidies, 2. How do taxes affect efficiency vouchers, and patents can and equity? a. Equity achieve a more efficient 3. What is the free rider b. Sources of income outcome problem? inequality  Marginal benefit vs. private 4. Why do market decision Mathematical/Graphical Skills benefit makers face inappropriate incentives when an externality Graph a negative and positive  External benefits is present? spillover affect (externalizes)  Marginal social benefit Sample Activities  Deadweight loss Illustrate a graphical analyses of  Government actions with  Morton, Unit V pollution or other externalities positive external benefits Sample AP Economics Test (private cost v. social cost  Public provisions Question Read and interpret Lorenz curves  Subsidies/vouchers Read and interpret Gini coefficients  2002, explains the 3. Distinguish among private efficient output and goods, public goods, and price with negative and common resources. positive externalities;  Excludable goods provides corrective  Rival goods actions (taxes and/or  Private goods subsidies) for market failures  Public goods  2006, analysis of MSC  Common resources vs. MPC and MSB = 4. Explain the free-rider problem MSC within a basic and how public provision can supply and demand help t overcome that problem. analysis.  Free-rider problem  Efficient quantity of public goods  Demand for public goods

5. Explain the problem of the commons and review the AP Outline Specific Learning Tasks Sample Problems possible solutions to that problem.  Commons, problems and efficient use 6. Explain the effects of regulation of natural monopoly and oligopoly.  Regulation  Regulation process  Public interest theory  Natural monopoly, marginal cost pricing, average cost pricing  Cartel regulation 7. Describe U.S. antitrust law and explain three antitrust policy debates.  Anti-trust laws  Recent cases  Predatory pricing  Merger rules

Chief Reader Formative Signal:

1. illustrate, differentiate and explain private cost with total social cost 2. understand relationships between negative externalities and marginal social cost vs. marginal private cost and the impacts on price and output

Syllabus for Advanced Macro Economics

August 2007

Course Title: AP Macro Economics is designated in our school system as AP Micro Economics

Curricular Requirements Page CR1 – Basic Economic Concepts 3

CR2 – Measurement of Economic Performance 4

CR3 – National Income and Price Determination 5

CR4 – Financial Sector 6

CR5 – Inflation, Unemployment, and Stabilization Policies 7

CR6 – Economic Growth and Productivity 9 CR7 – Open Economy, International Trade and Finance 10

CR8 – Understanding of Aggregate Economic Activity Utilization of Resources within and Across Countries and the Critical evaluation of 5,7,10

Determinants of Economic Progress and Economic Decisions Made by Policy Makers

CR9 – Generate, Interpret, Label, and Analyze Graphs Charts and Data to Describe Economic Concepts 3-10

Course Description:

School Organization:

The school district’s instructional organization is mandated by two semesters. The curriculum of the College Board’s Advanced Placement (AP) Economics is a semester long class. The syllabus submitted represents the semester-long AP Macro Economics sequence.

Text:

Gwartney, James D; Stroup, Richard L; Sobel, Russel; and Macpherson, David A. Economics: Private and Public Choice. (11th Edition). Thomson, Southwestern, 2006. ISBN: 0-324-20564-3.

 Readings and assignments are indicated in syllabus and are cited as Gwartney Additional Instructional Sources:

Sowell, Thomas. Basic Economics: A Common Sense Guide to the Economy. (3rd Edition). Basic Books, 2007. ISBN: 0-465-00260-9.

Miller, Roger LeRoy, Benjamin, Daniel K. The Economics of Macro Issues. (2nd Edition). Pearson Education, Inc., 2005. ISBN: 0-321-30359-8

Miller, Roger LeRoy, Benjamin, Daniel K., North, Douglass C. The Economics of Public Issues. (14th Edition). Pearson Education, Inc., 2005. ISBN: 0-321-30349-0

Morton, John S. and Goodman, Rae Jean B. Advanced Placement Economics. (3rd Edition). National Council on Economic Education, 2003. ISBN: 1-56183-566-8 Syllabus – Advanced Placement Macro Economics

AP Outline Specific Learning Tasks Sample Problems I. Basic economic concepts 1. Use the production possibilities Read. (8-14%) frontier to illustrate the economic Gwartney. problem.  Chapter 1, “The A. Scarcity, choice  Topic: Production Economic Approach”; and opportunity possibilities frontier  Chapter 2, “Some Tools  Scarcity, choice, cost of the Economist” th  Free lunches vs. trade Miller 14 ed. cost offs  Chapter s 1, 2, 3, 2. Calculate opportunity cost. 4,29,31,32 B. Production  Topic: Opportunity cost Sowell possibilities curve  Increasing vs. constant  Chapters 1, 19 cost Essential Questions C. Comparative 3. Define efficiency and describe an 1. What are the economic goals advantage, efficient use of any society? of resources.  Topic: Efficiency 2. How does a production specialization, and trade  Technical or productive possibilities model illustrate the efficiency economic problem of scarcity, D. Demand, supply  Allocative efficiency choice, and cost? and market 4. Explain how people gain from specialization 3. What are the guideposts to and trade. economic thinking? equilibrium  Topic: Specialization  Absolute vs. 4. Why do people trade? E. Macroeconomic comparative advantage issues;  Gains from trade Sample Activities 5. Explain how technological change and  Morton, Unit I business cycle, unemployment, increases in capital and human Sample AP Economics Test capital expand Question production possibilities.

 Topic: Economic growth inflation, growth 2003 Interpret PP on two and the pff. countries; determine absolute/comparative advantage and terms of trade; determine Mathematical/Graphical Skills exports/imports and explain benefits of trade.  Graph a production possibility model  Explain the shapes of the production possibilities curves.  Explain how the production possibilities model shows scarcity, choice, and cost.  Interpret selected points on the production possibilities model.  Explain and show economic growth on the production possibility models  Explain and show the affects of trade on a production possibility model.  Calculate opportunity cost  Calculate terms of trade and AP Outline Specific Learning Tasks Sample Problems gains from trade

II. Measurement Economic 1. Define GDP and explain why the Read : Gwartney Performance value of production, income and expenditures are the same for an  Chapter 7, "Taking the A. Circular flow economy Nation's Economic Pulse  Expenditure Approach  Chapter 8, "Economic B. Gross domestic product;  Income Approach Fluctuations, components of GDP, Unemployment, and National income concepts. 2. Explain the circular flow model Inflation and use the model to explain Miller 2nd C. Real versus nominal gross GDP how households, firms, government and international  Chapters 6,7,10 D Inflation measurement and markets interact (to constitute GDP) Sowell adjustment 3. Distinguish between nominal GDP and real GDP  Chapter 15 1. Price indices 4. Explain and describe limitations Essential Questions : Nominal and real values 2. of real GDP as a measure of 3. Cost of inflation economic well being. 1. What are the measures of E. Unemployment 5. Explain what the consumer price national economic index is and how it is calculated performance? 1. Definition and 6. Explain limitations of the CPI 2. How can we measure the measurement level of real performance? 7. Use the CPI to explain inflation Types of unemployment 2. and to calculate real values 3. Who is helped and who is 3. Natural rate of (wages, interest rates, prices) harmed by inflation? unemployment 8. Define unemployment rate and 4. How does a circular flow its relationship with GDP describe the economy of the United States? Mathematical/Graphical Skills 9. Describe sources and types of 5. What is meant by unemployment. 1. Draw and explain circular flow unemployment? models 2. Compute and interpret price Sample Activities indexes (CPI, and GDP  Morton, Unit II deflators) Sample AP Economics Test 3. Convert nominal data to real Question data 2. 1997, draw and label circular 4. Compute GDP and NNP given flow diagram; identify novel data components of AD and AS; 5. Calculate unemployment rates 1997, identify two ways of from labor force participation calculating GDP (income vs. rates expenditure approach). 3. 1999, identify method of 6. Calculate rate of inflation calculating GDP; identify between years shortcomings of GDP figure; evaluate growth of GDP; show effects of investment on Chief Reader Formative Signal: ppf 1. understand link between expenditures and income (circular flow model) AP Outline Specific Learning Tasks Sample Problems

III. National Income and Price 1. Explain the factors that Read: Gwartney Determination constitute a downward sloping  Chapter 9, "An Aggregate Demand (AD) Introduction to Basic A. Aggregate demand  Income, real interest rates, Macroeconomic and net exports effects Markets" 1. Determinants of aggregate 2. Explain the factor that influences  Chapter 10, "Working demand the AD. with Our Basic Explain the factors that Aggregate Demand and 2. Multiplier and crowding- 3. constitute an upward sloping Aggregate Supply Model out effects Aggregate Supply (AS) curve Chapter 11, "Keynes and B. Aggregate Supply  4. Explain the factors that influence the Evolution of the aggregate supply curve Macroeconomics" 1. Short run and long run 5. Use the AS/AD model to explain Essential Questions analyses fluctuations in the economy. 2. Stick versus flexible  Aqs=Aqd constitutes 1. What are the different models wages and prices equilibrium in the economy that explain the status of the 3. Determinants of aggregate 6. (LR) Explain distinctions national economy? supply between potential GDP and 2. How does each of the models C. Macro economic equilibrium actual GDP suggest a method and  Relationship between strategy for dealing with 1. Real output and price level potential GDP and national economic problems? investment and capital; 3. How does the AS/AD model 2. Short and long run labor markets compare with the Aggregate  Aqs=Aqd constitutes Expenditure Model 3. Actual versus full equilibrium in the economy (Keynesian Model) as they employment output and now compare/contrast attempt to explain the with real GDP. national economy 4. Economic fluctuations 7. (LR) Explain distinctions 4. How does the AS/AD model between natural rate of compare with the Keynesian Mathematical/Graphical Skills employment or full employment model as they attempt to and actual rate of  Draw and explain the explain the national unemployment components of a circular flow economy? model; explain how the  Relationship between Sample Activities components are related to AS/AD model and unemployment national income and GDP  Morton, Unit IIII 8. Introduce and explain aggregate concepts (1997) Sample AP Economics Test expenditure model (Keynesian  Draw and explain an AS/AD Income Expenditure Model) with Question model at various levels of fixed prices. unemployment. (1998)  Distinguish between  2005B Graphs a state of  Graph the changes in the autonomous expenditures LRE, and then analyzes AS/AD model given changes in and induced expenditures the impact of a decline in SRAS, AD, and LRAS. and how it influences GDP Xn (recognizing that  Graph an income expenditure  Explain how GDP adjust to recession in foreign model (Keynesian cross) and country decreases AP Outline Specific Learning Tasks Sample Problems how it is related to AS/AS equilibrium demand for US model  Describe and explain the products); shows impact  Given a multiplier effect, show expenditure multiplier on domestic market changes in the Keynesian and  Derive AD form the  1998, Use of AS/AD to AS/AD model expenditure model show FE economy and  Compute multiplier given impact of increase in simple models, models with AD ;graph AS/AD marginal tax rates, and in economy at FE complete models. Chief Reader Formative Signal: 1. differentiate secondary effects (increase in price levels in NNP which cause Md to increase) from the increase in demand for loanable securities 2. understand the multiplier effect and how it works 3. differentiate between changes in SR and LR investment given fiscal/monetary changes. 4. understand simultaneous shifts in AS and AD lead to indeterminate price levels

IV. Financial Sector 1. Define money and describe its Read: Gwartney functions  Chapter 13, "Money and A. Money, banking and financial 2. Describe the momentary system the Banking System" markets and explain the functions of  Chapter 14, "Modern banks Macroeconomics and 1. Definition of financial  Balance sheets Monetary Policy" assets: money, stocks,  Required and Excess Miller 2nd bonds Reserves  Chapters 18,21,22 2. Time value of money  Money creation and Sowell 3. Measures of money destruction through loans  Chapter 16 and repaying loans supply Essential Questions:  Deposit Money Multiplier Banks and creation of 4. effect money 1. How do banks operate?  Loanable fund market and 5. Money demand LR interest rates 2. How does the FED 6. Money market 3. Describe and explain the time promote a fully

7. Loanable funds market value of money employed B. Central Bank and control of the  Bond market economy? money supply  Money demand Sample Activities  Money market and SR 1. Tools of central bank policy interest rates 4. Describe the functions of the  Morton, Unit IV 2. Quantity theory of money Federal Reserve System. Sample AP Economics Test  Organization Question 3. Real versus nominal interest  Tools of the FED; open rates market operations; required  1996, explain impact of reserves; discount rates a deposit on bank Mathematical/Graphical Skills  Creation of nominal interest reserves, loaning ability 1. Chart and explain what rates by the FED and total money supply happens to excess reserves,  2006B Graphs loanable required reserves, and lending fund market given a ability when demand deposits changes in savings rate are made by individuals of consumers and impact 2. Graphically illustrate the effects on real interest rates; AP Outline Specific Learning Tasks Sample Problems on money supply and interest and impact on LRAS; (2) rate with an increase/decrease Explains impact on the in the money supply MS given a new DD; 3. Show transmission mechanism explains leakages within of monetary policy within a the banking system and Keynesian model and within impact on loans and new the monetarist model. MS created; explains Chief Reader Formative Signal: impact on MS and MD 1. differentiate secondary with an increase in effects (increase in price government spending levels in NNP which cause financed by sale of Md to increase) from the bonds to the central increase in demand for bank loanable securities 2. understand the multiplier effect and how it works 3. differentiate between changes in SR and LR investment given fiscal/monetary changes.

V. Inflation, Unemployment, and 1. Explain fiscal policy measures in Read: Gwartney Stabilization Policies response to (a) recessions; (b) inflationary periods; (c)  Chapter 12, "Fiscal A. Fiscal and monetary policies stagflation Policy" a. Use AS/AD analysis  Chapter 15, 1. Demand side effects 2. Explain monetary policy measure "Stabilization Policy, in response to (a) recessions; (b) Output and Employment 2. Supply side effects nd inflationary periods; (c) Miller 2 stagflation 3. Policy mix a. Use AS/AD analysis  Chapters 4. Government deficits 3. Show and explain the Keynesian 8,12,13,14,15,19 Sowell and debt transmission (interest rate changes to investment changes B. Inflation and unemployment to changes in AD)  Chapter 17 4. Show how monetary policy can Essential Questions 1 Types of inflation offset or complement fiscal policy goals. 1. What are the different a. Demand-pull inflation 5. Using a SR Phillips Curve combinations of fiscal and Analysis, describe the short run monetary policy? b. Cost push inflation trade off of inflation and 2. What are the affects of using unemployment monetary policy and/or fiscal AP Outline Specific Learning Tasks Sample Problems 2. The Phillips curve: short run 6. Distinguish between the sort run policy on interest rates, price and long run and the long run Phillips curve stability, and employment and describe the shifting tradeoff and national income? 3. Role of expectations between inflation and 3. What are the various policies unemployment used to promote national Mathematical/Graphical Skills 7. Explain the role of expectations output, employment and price 1. Graph the short run trade and how expected inflation stability? offs between inflation and influences the short run trade off. 4. How do economists measure unemployment (Phillips 8. Compare and contrast the trade inflation? Curve) offs using the Phillips curve 5. What causes (and does not 2. Use an AS/AD illustration analysis with that of using the cause) inflation? with an increase in AD to AS/AD model. 6. What is the trade off between explain the movements unemployment and inflation? along a Phillips Curve. 7. What is the role of 3. Using the Phillips Curve, expectations in accelerating graph how changes in the (or decelerating) inflation? AS/AD model would Sample Activities appear on the Phillips Curve Model.  Morton, Unit III, 4. Graphically illustrate, how Activities 30-33. expectations affects the  Morton, Unit IV, Activities Phillips Curve model 40 and 41 Graph the affects of a 5.  Morton Unit V combined monetary and Sample AP Economics Test fiscal policy. Question 6. Compare and contrast affects of monetary policy and/or fiscal policy given  1999, how changes in differing elasticity of interest rate changes demand for investment aggregate output and demand and/or demand price levels; identify a for money fiscal policy to counter effects of inflation and Compare and contrast 7. effects of such policy on graphically the Keynesian output, price level and and Monetarist nominal interest rates controversies concerning and price of bonds the use of fiscal and monetary policy  2003, draw SRAS/AD Chief Reader Formative Signal: graph showing recession 1. explain expansionary with FE output, current fiscal policy that and current price levels; requires government to graphs and explains fund sale of securities impact of decrease in which increase interest fiscal spending on output rates and price levels and 2. explain expansionary affects on unemployment fiscal policy that  2005B recommends an requires government to OMO given recession fund sale of securities and graphically which increase interest illustrates change in rates money market and 3. understand interest rates and how it simultaneous shifts in will affect AD, price AS and AD lead to levels and output indeterminate price  2005 ,draw a short run levels Phillips curve give novel data ; and the impact on the SRPC when there is a supply shock to the left. Analysis of long run Phillips curve given a novel natural rate of AP Outline Specific Learning Tasks Sample Problems employment and the relationship between U and inflation in the long run.

VI. Economic growth and 1. Review the concept of Read: Gwartney productivity potential output (LRAS) 2. Explain the concept of  Chapter 16, A. Investment in human economic growth "Economic Growth capital 3. Define and explain the and the Wealth of relationship among capital, B. Investment in physical Nations" investment, saving and nd capital Miller 2 economic growth C. Research and 4. Reinforce how investment Chapters 1,2,3,4,5 development, and and savings decision are  technological made to determine real Sowell progress interest rates D. Growth policy 5. Reinforce how government  Chapter 12 Mathematical/Graphical Skills influences the real interest Essential Questions  Graph affects on price stability, rate, investment and employment and growth given savings 1. What is economic growth? 6. Explain how the labor an increase in the long run 2. What factors can result in aggregate supply. market contributes to economic growth?  Show how increases in LRAS economic potential and growth 3. What government policies affect production possibilities have been used (and can be model (1998) 7. Identify sources of economic growth and used) to stimulate economic  Show growth recessions using theories of economic growth AS/AD models. growth Sample Activities  Recognizes shifts in LRAS 8. Use AS/AD analysis to given novel changes in capital describe effects of  Morton, Unit VI AP Outline Specific Learning Tasks Sample Problems stock, technology, resources economic growth. Sample AP Economics Test Chief Reader Formative Signal 9. Describe policies that might Question 1. understand why and promote economic growth how economic growth  2002, can explain how occurs LRAS changes or how understand how GDP 2. increases in real GDP increases as a result of can be changed (e.g., increases in AD and/or labor force participation; with economic growth increase in government (increases in LRAS) deficits; decrease in 3. understand that growth inputs required to occurs in the productive produced outputs; capacity increase in educational; 4. recognize relationships increase in rate of between capital stock savings) and growth 5. distinguish between short run and long run facts that change economic growth

VII. Open Economy: International 1. Explain why nations trade Read: Gwartney Trade and (distributive practice from beginning of course, emphasis  Chapter 17, Finance on comparative advantage and "Gaining from terms of trade) International Trade" A. Balance of payments accounts a. Explain benefits of  Chapter 18, trade "International 1. Balance of trade b. Explain trade barriers Finance and the (tariffs and quotas) and Foreign Exchange 2. Current account how the reduce trade Market. nd c. Give arguments Miller 2 3. Capital account for/against barriers.  Chapters B. Foreign exchange market 2. Explain the balance of trade and how the balance of trade 23,24,25,26,27,28 determines the international Sowell 1. Demand for and supply of borrowing and lending foreign exchange 3. Explain exchange rates and how  Chapters 20,21 2. Exchange rate they are determined and why Essential Questions determination they fluctuate 3. Currency appreciation and 4. Explain and link foreign trade to 1. Why do nations engage in depreciation the AS/AD model. international trade? C. Next exports and capital flows 5. Explain and link how 2. Why do nations sometimes monetary/fiscal policy affects impose restrictions on D. Links to financial and goods international trade and the international trade? market balance of payments. 3. How do exchange rates AP Outline Specific Learning Tasks Sample Problems international finance and affect international trade? exchange rates 4. What is the affect of international markets on the Mathematical/Graphical Skills US economy in terms of price 1. Graph demand and supply for stability, employment, and US currency AND demand and economic growth? supply for foreign currency. 5. What is a trade deficit? 2. Graph the impact of an Sample AP Economics Test increase/decrease in net Question exports on AS/AD models. 3. Graph impact of an  2002, can use demand appreciated dollar/depreciated and supply analysis in dollar on AS/AD foreign money market to 4. Graph the impact of tariffs show changing value of Chief Reader Formative Signal dollars v. the value of 1. students must be able to foreign currency; can show how a change analyze effects of international value of monetary/fiscal policies dollars changes imports on exports, imports, and and exports from a international value of the foreign country dollar. 2. understand why demand  2003, explain how for imports/exports changes in interest rates occur (decrease) affects 3. understand link between international value of capital flows and dollar; exports and currency values; imports differentiates between money market and foreign markets; differentiates between money market and foreign market. 4. link changes in international value of the dollar with changes in imports/exports 5. explain changes in exports/imports due to relative price changes 6. recognize and explain financial flows given changes in interest rates between countries