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PACING GUIDE FOR AP MACROECONOMICS
2011-2012
(UNIT 1: INTRO AND MICRO (Chapters 1, 2, 3) (4 weeks)
Chapter 1
Topics & Concepts Covered
The use of abstraction, models & graphs in economics
Externalities, positive and negative
Chapter 2
Topics & Concepts Covered
Scarcity and choice
Resources
Opportunity Costs
Production Possibility Curves
Expansion and contraction of
Points inside/outside
Law of Increasing Marginal Costs
Three economic questions
Adam Smith: the Invisible Hand; Division of Labor; Economic Freedom and
Comparative Advantage
Chapter 3
Topics & Concepts Covered
Demand
The Law of; Reasons for
Schedules and Curves
Assumptions and Shifts (non-price determinants)
Inferior Goods
Supply
The Law of; Reasons for
Schedules and Curves
Assumptions and Shifts (non-price determinants)
Equilibrium price and quantity
Price ceilings and floors
shortages and surpluses
Consequences of price supports
Models Used: Production Possibilities Graph
Assessments: Weekly or bi-weekly quizzes. Multiple choice test on entire unit. Test on
Scarcity of Water and Price Ceilings, Tariff barriers and Price Floors.
Other Readings: TBA (To Be Announced).
Video: “What’s Economics All About,” Economics USA.
UNIT 2: INTRO TO MACRO (Chapter 4, 5, 6) (4 weeks)
Chapter 4
Topics & Concepts Covered
Distinction between micro and macro-economics
What is an aggregate - AS/AD
What is GDP? (GDP v. GNP)
What is included, not included
Nominal v. real
Net v. Gross Domestic Product
Per capita
Potential
What GDP is not
Historical trends in growth rate of GDP
What is Inflation?
Demand Pull v. Cost Push
Historical trends of inflation
Stagflation: causes of 1973-1980
Supply side economics
What it attempted, and how
What is Productivity?
Factors leading to
as a key to long-run growth and future standard of living
long-run growth v. recovery to long-run AS
as a counter to stagflation (show on an AS/AD graph)
Reaganomics – GWB Reagan Redux?
Clintonomics
Obamanomics: The Return of John Maynard Keynes
Chapter 5)
Topics & Concepts Covered
Stabilization policy – The goals of macroeconomic policy
Productivity growth – Potential GDP
On a production possibility curve
Unemployment
Types of
Measuring and mismeasuring
Underemployment & Discouraged Workers (underutilization rate)
Unemployment Comp. (automatic stabilizer)
Labor Force Participation Rate
Full employment and Potential GDP (NAIRU)
Innovation, Trade and Unemployment
Inflation, Deflation, Disinflation
Types of inflation
Measurements of (CPI, PPI, Deflator)
Nominal and real wages, interest rates, etc.
What groups are hurt by recession v. inflation
Bracket-creep and indexing
Chapter 6
Topics & Concepts Covered
The Goose: Investment
Capital, Technology, Labor Quality
The Golden Egg: Productivity
Growth Rates and Convergence Theory
Models Used: Business Cycle Graph; Historical Trend Right Angle Graphs; CIGXM; WIRP
Assessments: Weekly or bi-weekly quizzes. Multiple choice test on entire unit. Exercise on
recognizing types of inflation, interest rates and inflation premiums, effects of inflation
on borrowers and lenders.
Other Readings: TBA
UNIT 3: CIGXM & the MULTIPLIER PROCESS (Chapter 8) (4 weeks)
Chapter 8
Topics & Concepts Covered
Circular Flow Diagram – leaks and injections, liquidity traps
Why income and GDP must be equal
Components of GDP, aggregate demand = CIGXM
Why income and GDP must be equal: CIGXM = WIRP
MPC formula
Determinants of Consumption, Investment and Net Exports
Importance of equilibrium and inventory levels
Net Exports, exporting recessions and expansions
CIGXM and full employment
Income/spending expansion & contraction of real GDP
Induced v. autonomous changes in spending
Role of Inventories
Calculation of Spending Multiplier
When to use Multiplier analysis
Multiplier in reverse
Multiplier with tax changes
Why the multiplier process is over-simplified
Paradox of Thrift
Closing Inflationary and recessionary gaps using multiplier analysis
Models Used: CIGXM; Circular Flow Chart; Income-Expenditure Graph
Assessments: Two unit quizzes: one on constructing and analyzing 45 degree graphs, and the
second on applying the spending multiplier concept using the Income/Expenditure model.
Other readings: TBA
UNIT 4: FISCAL POLICY (Chapters 9, 10, 14)(4 weeks)
Chapter 9
Topics & Concepts Covered
AS/AD graph
Slope of the AS curve
Short-run realistic and simplified v. long-run
Profits/price gap in the short-run
Recessionary gap on
Natural (laissez-faire) cure for recessionary gap
Fiscal policy cure for recessionary gap
Inflationary gap on
Natural (laissez-faire) cure for inflationary gap
Fiscal cure for inflationary gap
Pros and cons of natural and fiscal cures for inflation and recession
Stagflationary gap on
Why short-run natural cure is unlikely
Limits of fiscal cure
Supply-side policies revisited
Shifts of the AS
Change in wages w/o productivity change
Technology  productivity
Labor, quantity, quality
Cost/availability of inputs of production
Limits of Fiscal Policy—Effects of inflation, taxation, negative net exports on the
income creation process, revisited.
Crowding out with Loanable Funds Graph
Chapter 10
Topics & Concepts Covered
Taxation:
Tax Brackets – Always say yes to a raise
Progressive, Regressive, Proportional
Effects on Multiplier
Safety-valve (automatic stabilizer)
Evaluation of Supply-side Tax Policies
Chapter 14
Topics & Concepts Covered
Budget Deficits, National Debt, Trade Deficit (Current Accounts)
Myths and Reality
When is debt good?
Cyclical, countercyclical budget policy v. structural deficit
How deficits affect the economy
Loanable Funds Market and graph
Crowding Out v. Crowding In
Deficit Reduction and Growth/Deficit Increase and Recession: Recent History
Models Used: AS/AD Graph, simplified short-run AS, realistic short-run AS, long-run AS;
Loanable Funds Market
Assessments: Weekly or bi-weekly quizzes. Multiple Choice Unit Test, Essay test on
Recession/Inflation, prescribed fiscal policy, compared to effects of laissez-faire
approach, effect on long-run growth (crowding out), and net exports.
Other Readings: TBA
Unit 5: MONEY, BANKING AND MONETARY POLICY (Ch 11, 12) (4 weeks)
Chapter 11
Topics & Concepts Covered
Money v. Barter
Definition of money
Different types of money
Three uses of money
Composition of M1 M2, etc
Liquidity defined
History of Banks
How banks create money
The Money Multiplier formula
Limitations on money creation
Multiplier contractions
T-Accounts
Chapter 12
Topics & Concepts Covered
Money v. Income
The FED
Independence of
Job of
Three tools of the Fed
Reserve Requirement
Discount Rate
Open Market Ops & the Fed Rate
Which is most commonly used and why
Money Market v. Loanable Funds Market Graphs
Effects of Fed actions on
The determinants of the demand for money
The Fed’s Dilemma: Interest rates v. Quantity of Money
On a Money Market Graph
Monetizing the Debt (from Ch 14)
Cause and effect from monetary policy to changes in GDP & PL
On an AS/AD graph
Fiscal v. Monetary Policy
Crowding out revisited
The Golden Goose – Long-run growth
Models Used: CIGXM; Money Market Graph; AS/AD Graph; T-Accounts
Assessments: Weekly or bi-weekly quizzes. Multiple-Choice unit test, essay test on economic
problem solved by fiscal and/or monetary policies, effect on output & price level on a
AS/AD graph, effect on long-run growth using loanable funds graph and money market
graphs, effect on net exports.
Additional Reading: TBA
Video: Gold and the gold standard.
UNIT 6: THEORIES (Chapters 13, 15 (2 weeks)
Chapter 13
Topics & Concepts Covered
Monetarism
Defined
The equation of exchange
modern v. classical
Velocity
Inverse relation to M
Determinants of
View of Supply Curve
Fixed monetary rule v. discretion
Keynesian v. Monetarist debate
Dilemma of Fed revisited
Should the Fed control r or QM
Rules v. Discretion
Friedman's Rule
The 1980s experiment with Monetarism
Chapter 15
Topics & Concepts Covered
Phillips Curves Long-term and short
Trade off between inflation and unemployment
The 1970s
Expectations
Adaptive
Rational
Different views of Classical, Keynesian, Monetarists and Rational Expectationists
re:
necessity for discretionary fiscal and monetary policy
effectiveness of discretionary fiscal and monetary policy
slope of the AS curve
slope of the Philips curves (S and LR)
best way to conduct monetary policy
crowding out v. crowding in and monetizing the debt
short-run v. long-run interest rates
Models Used: MxV=PxY; Phillips Curves, long-run and short-run; Money Market Graph
Assessments: Weekly or bi-weekly quizzes. Multiple choice unit test. Essay test on economic
problem, solved according to Neo-Keynesian, Monetarist and Classical Economic
theories.
Video: The Great Depression
UNIT 7: THE GLOBAL ECONOMY (Ch 16, 17, 18 ) (4 weeks)
Chapter 16
Topics & Concepts Covered
Free Trade and the Wealth of Nations
Absolute and comparative advantage
Using production possibility curves
The mutual benefits of free trade
Structural Unemployment
The Unequal Benefits of Free Trade
Tariffs, Quotas and informal barriers
Balance of Payments:
Current accounts balance
Capital accounts balance
Chapter 17
Topics & Concepts Covered
What is the Foreign Exchange Market
Exchange rates
Fixed v. Floating
Mechanics of
Foreign Exchange Graphs
S/D currency curve shifts
Capital Flows, effects on Loanable Funds Graph
Balance of Payments, Capital Inflows and Outflows
Chapter 18
Topics & Concepts Covered
Effect of Exchange Rates on national economies
And vice versa
Doing away with exchange rates
Dollar pegs: China, Hong Kong
Dollarization
El Salvador
Panama
Equador
The Euro
Models Used: Foreign Exchange Currency Graphs; AS/AD Graphs
Assessments: Weekly or bi-weekly quizzes. Multiple choice unit test. Essay test on economic
problem solved with Neo-Keynesian fiscal policy compared to Monetarist policy. Effect
of each on output, employment, price level, long-run growth, exchange rates, net exports.
Other Reading: TBA
Final Assessments: Students will take 2 practice and one final released AP multiple choice tests.
Students will answer 3 practice and one final released AP free response questions.