AP Course

The course in AP Macroeconomics is designed to be a one semester, college-level course. This class is taken as Part II of a combined full year AP Micro and Macro program. As a goal, this course is designed to prepare students for success on the AP Macroeconomics exam that is taken in May.

AP Macroeconomics emphasizes economic principles as applied to the economy as a whole. Topics covered in the course are aligned with the AP Macroeconomic Course Description outlined by the . The course will provide instruction in each of the following seven topics

• Basic economic concepts • Measurement of economic performance • National income and price determination • Financial sector • , , and stabilization policies • and productivity • Open economy: international and finance

Text Used Bade, and Michael Parkin. Foundations of Econmics (AP Edition), Pearson/Addison Wesley, 2007.

Supplemental Text Morton, John. Macroeconomics Student Activities, 3rd ed. New York: National Council on Economic Education, 2003

Additional Readings Wheelan, Charles. Naked Economics, Undressing the Dismal . Norton Press 2002 Wall Street Journal The Economist

Web Resources • http://www.reffonomics.com • http://www.ncee.net • Teacher web page

Assessments

Section Quizzes 30% Unit Test 30% Homework (Problem sets, readings, worksheets) 20% Project 10% Participation 10%

Unit One: Basic Economic Concepts (3 weeks)

• , choice, and • Production possibilities curve • , , specialization and exchange • , , and market equilibrium • Macroeconomic topics: Circular Flow, business cycles, unemployment inflation.

Unit One Key Concepts and Graphs

Concepts: The economic way of thinking, micro vs. macro, positive vs. normative economics, choice and economic decision making, scarcity, opportunity cost, production possibilities, absolute and comparative advantage, division and specialization of labor, demand schedule, the determinants of demand, firm and market demand curves, supply schedule, determinants of supply, market equilibrium, shifts in demand and supply, determining price and quantity, macroeconomic issues.

Graphs • Production possibilities frontier • Demand and Supply • Demand and Supply shift models

Text Chapters: 1,3,4,20,21,22

Activities Morton. AP Economics, Activities 1-8. Mankiw’s Ten Principles of Economics

Unit Two: Measurement of Economic Performance (2 weeks)

National income accounts • Circular flow • • Components of gross domestic product • Real versus nominal gross domestic product Inflation • Price indices • Nominal and real values • Cost of inflation Unemployment • Definition and measurement • Types of unemployment • Natural rate of unemployment

Text Chapter: 20

Activities Morton. AP Economics, Activities 12-17

Unit Two Key Concepts and Graphs:

Concepts: Circular flow of economic activity, inclusions and exclusions of GDP, expenditure approach to GDP, income approach to GDP, nominal versus real GDP, phases of the , types of unemployment, full employment, measurements of inflation, types of inflation, effects of inflation.

Graphs: • Circular Flow Diagram • Phases of the business cycle

Unit Three: National Income and Price Determination: (2 weeks)

Aggregate demand • Determinants of • Multiplier and effects • Short-run and long run analyses • Sticky versus flexible wages and prices • Determinants of aggregate supply Macroeconomic equilibrium • Real and price level • Short and long run • Actual vs. full employment output • Economic fluctuations

Text Chapter: 29

Activities Morton. AP Economics, Activities 20-29

Unit Three: Key Concepts and Graphs

Concepts: marginal propensity to consume, the multiplier effect, reasons for a downward sloping aggregate demand curve, determinants of aggregate demand, determinants of aggregate demand, aggregate supply in the short and long run, sticky versus flexible price and wages, determination of equilibrium output and price level, actual versus full employment, utilization of resources

Graphs: demand curve Aggregate demand and short run aggregate supply curve Aggregate demand and long run aggregate supply curve

Unit Four: Financial Sector: (3 weeks)

Money Banking and financial markets • Definition of financial assets: , , bonds • Time value of money (present and future value) • Measures of • and the creation of money • Money demand • • Loanable funds market Central and control of the money supply • Tools of policy • • Real versus nominal interest rates

Text Chapters: 24,26,27,28

Activities Morton. AP Economics, Activities 34-39

Unit Four Key Concepts and Graphs:

Concept: Functions of money, characteristics of money, measures of money, demand of money, the money market, the creation of money, loanable funds market, organization of the Federal Reserve, tools of , responsibilities of the Fed, quantity theory of money

Graphs • Money market • Loanable funds market

Unit Five: Inflation, Unemployment, and Stabilization Policies. (2 weeks)

Fiscal and monetary policies • Demand-side effects • Supply-side effects • • Government deficits and debts

Inflation and unemployment • Types of inflation • Demand-pull inflation • Cost-push inflation • The : short run versus long run • Role of expectations

Text Chapters: 31,32

Activities Morton. AP Economics, Activities 43-46

Unit Five Key Concepts and Graphs:

Concepts: fiscal policy and the aggregate demand/aggregate supply model, monetary policy and the aggregate demand/aggregate supply model, combinations of the policies and their effects, international considerations, government deficits and debts, long-run aggregate supply, demand pull and cost push inflation, the inflation-unemployment relationship, expectations

Graphs: • Aggregate demand/aggregate supply model • Phillips curve

Unit Six: Growth and Productivity (2 weeks)

• Growth and Productivity • Investment in human • Investment in physical capital • Research and development, and technological development • Growth policy • Productivity

Text Chapters: 24,25

Activities Morton. AP Economics, Activity 47

Unit Six Key Concepts and Graphs:

Concepts: ingredients of economic growth, production possibilities analysis, growth in the AD/AS model, long-and short-run analysis, labor and productivity, technological advance Graphs • Production possibilities curve • Aggregate demand/aggregate supply model

Unit Seven: International Trade and Finance (2 weeks) International Trade and Finance A. accounts • • Current account • Capital account B. • Demand for supply of foreign exchange • determination • Currency appreciation and depreciation C. Net exports and capital flows D. Links to financial and goods markets

Text Chapters: 34,35

Activities Morton. AP Economics, Activities 49-55

Unit Seven Key Concepts and Graphs

Concepts: the United States and world trade, absolute and comparative advantage, balance of payments, foreign exchange markets, implications of foreign trade, effects of domestic fiscal and monetary policies on capital flows and foreign exchange markets, use of resources, decision and policy making

Graphs: • Production possibilities • Foreign exchange market