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12th Grade AP Economics
Man insisted on some sort of intellectual ordering to help him understand the world in which he
lived. The harsh and disconcerting economic world looked ever more important. No wonder Dr.
Samuel Johnson himself said “There is nothing which requires more to be illustrated by
philosophy than trade does. In a word, the time for the economists had arrived.
Robert Heilbroner in The Worldly Philosophers
Instructor:
Phone:
Email
WebPage:
Text: Arnold, Roger A. (2005). Economics, 7th Edition. Southwestern/Thomson Publishing
Workbook: Morton, John S. (2003). Advanced Placement Macroeconomics Student Activities,
3rd Edition. National Council on Economic Education (NCEE)
Summer Reading: Wheelan, Charles (2002). Naked Economics: Undressing the Dismal
Science. New York: Norton Publishers
Course Assignments, Activities, and Assessments for the Units of Study:
 Tests (1 per unit) and quizzes
 Homework
 Projects, both group and individual, online and in class
 Lectures and Note-taking
 Morton Workbook Activities
 Economic simulations
 Daily Class and Homework Assignments are available online at
Following is the sequence and units of study for the AP Macroeconomics course including
overview of topics covered as required by the College Board, major objectives, correlating
textbook chapters, homework assignments, Morton activities, and simulations.
This sequence of study is based on recommendations and guidelines in the Advanced Placement
Economics (3rd edition) Teacher’s Resource Manual by John Morton, published by the National
Council on Economic Education (NCEE) in 2003.
The simulations come from Economics in Action: 14 Greatest hits for Teaching High School
Economics by Jane Lopus and Amy Willis (editors), published by the National Council on
Economic Education (NCEE) in 2003.
I. Basic Economic Concepts (8-12%)
A. Scarcity, choice and opportunity costs
B. Production possibilities curves
1
C. Specialization, comparative advantage and exchange
D. Demand, supply, and market equilibrium
E. Macroeconomic issues: business cycle, unemployment, inflation, growth
Major Objectives:
 Discuss how the concept of scarcity underlies the study of economics
 Graph the Production Possibilities Curve
 Show opportunity costs on the Production Possibilities Curve
 Calculate comparative advantage
 Discuss how specialization and trade improves standard of living
 Show efficient, inefficient, and unattainable levels of production using the Production
Possibilities Curve
 Show economic growth in the Production Possibilities Curve
 Graph supply and demand
 Analyze price and quantity equilibrium using the supply and demand model
 Explain the reasons and effects for changes in supply and demand
Assigned Readings in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
1
What Economics is About
Pages
1-24
2
Economics Activities: Producing and trading
25-33
3
4
Supply and Demand: theory
Supply and Demand: Practice
34-59
60-93
Homework
q/p #1-20 (completed
over the summer)
q/p #1,3,5
n/g # 1, 3-7
q/p # 10, 11, 15
Simulations:
 A Market in Wheat
 Property Rights in a Market Economy
 The Role of Government in a Market Economy
Lessons:
 Lesson 1: Introduces scarcity, opportunity cost, production possibilities and comparative
advantage
 Morton 1: Scarcity, Opportunity Cost, and Production Possibility Curves
 Morton 2: Opportunity Cost and Comparative Advantage
 Morton 49: Determining Comparative Advantage
 Morton 50: Economic Efficiency and Gains from Trade
 Production Possibilities as Applied to World War II

Lesson 2: Introduces the concept of demand and factors that shift the demand curve
 Morton 3: Demand Curves, Movements Along and Shifts in Demand Curves
 Morton 4: Reasons for Changes in Demand
2

Lesson 3: Introduces the concept of supply and factors that shift the supply curve
 Morton 5: Supply Curves, Movements Along and Shifts in Supply Curves
 Morton 6: Reasons for Changes in Supply

Lesson 4: Brings concepts of supply and demand together to determine equilibrium price and
quantity
 Morton 7: Equilibrium Price and Quantity
 Practice S/D scenarios using whiteboards
II. Measurement of Economic Performance (12-16%)
A. National income accounts
1. Circular flow
2. Gross Domestic Product
3. Components of Gross Domestic Product
4. Real vs. nominal GDP
B. Inflation measurement and adjustment
1. Price indices
2. Nominal and real values
3. Costs of inflation
C. Unemployment
1. Definition and measurement
2. Types of unemployment
3. Natural rate of unemployment
Major Objectives:
 Diagram and explain the Circular Flow of the economy
 Identify what is excluded and included in calculating Gross Domestic Product (GDP)]
 Differentiate between nominal and real GDP
 Convert nominal GDP to real GDP
 Define and apply the formula for calculating GDP using the expenditure and income
approaches
 Identify and differentiate between types of unemployment
 Calculate the unemployment rate
 Calculate the employment rate
 Calculate the Labor Force Participation Rate
 Define Full Employment
 Calculate the inflation rate
 Explain and analyze the construction of a price index
 Differentiate between different types of inflation (cost push, demand pull)
 Identify the groups are harmed or helped by unanticipated inflation
 Discuss limitations inherent in the use of the measures of GDP, unemployment and inflation
Assigned Readings in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
3
Chapter
5
6
Title
Macroeconomic Measurement Part I:
Prices and Unemployment
Macroeconomic Measurement Part II:
GDP and Real GDP
Pages
121-138
Homework
n/g # 1-2, 4-8, 10
139-162
n/g # 1-3, 5, 10-11
Simulations:
 The Circular Flow of Economic Activity
Lessons:
 Lesson 1: Defines macroeconomics and describes the main components of the economy and
their interaction
 Morton 9: Test of Macroeconomic Thinking
 Morton 10: Understanding the Circular Flow

Lesson 2: Focuses on measuring key economic variables
 Morton 11: Measuring Broad Economic Goals
 Morton 12: All About GDP

Lesson 3: Addresses a key macroeconomic goal in looking at the effects of inflation and the
creation of a price index
 Morton 13: Price Indexes and Inflation
 Morton 14: Inflation Game: Royalty for a Day
 Morton 15: Who is Hurt and Helped by Unanticipated Inflation?

Lesson 4: Delves into how unemployment, employment, and labor force participation are
defined
 Morton 16: Types of Unemployment

Lesson 5: Examines the business cycle and pulls together all the concepts about economic
growth, inflation, and unemployment
 Morton 17: The Business Cycle
 Morton 18: Test Your Understanding of Macroeconomic Indicators
III. National Income & Price Determination (10-15%)
A. Aggregate demand
1. Determinants of aggregate demand
2. Multiplier and crowding-out effects
B. Aggregate supply
4
1. short run and long run analysis
2. sticky versus flexible wages and prices
3. determinants of aggregate supply
C. Macroeconomic equilibrium
1. Real output and price level
2. short and long run
3. actual versus full employment output
4. economic fluctuations
Major Objectives:
 explain propensity to consume and save
 differentiate between the APC/S and MPC/S
 Calculate the propensities to consume and save
 Apply the propensity to consume/save into determining the multiplier
 Explain the different effects of the government spending and tax multipliers
 Identify the determinants of Aggregate Demand
 Identify the determinants of Short Run Aggregate Supply
 Identify the determinants of Long Run Aggregate Supply
 Graph AD, SRAS, and LRAS
 Graph and identify the equilibrium price level and output
 Analyze the changes in the Price Level and Output when shifts occur in AD and SRAS
 Explain what is meant by sticky prices and wages
 Graph and explain the output and price level of the economy in a recessionary gap
 Graph and explain the output and price level of the economy in an inflationary gap
Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
7
Aggregate Demand and Aggregate Supply
8
The Self Regulating Economy
Pages
165-194
195-214
Homework
n/g # 2-5
Chapter 7 packet from
Arnold study guide
q/p # 1-9
n/g # 1-2
Lessons:
 Lesson 1: Introduces Average and Marginal Propensities to Consume and Save and the Role
of the Multiplier
 Morton 20: Practice with APC/S and MPC/S
 Morton 21: The Magic of the Multiplier
5

Lesson 2: Introduces Aggregate Demand and its determinants
 Morton 22: Investment Demand
 Morton 23: Introduction to Aggregate Demand

Lesson 2: Introduces determinants of Short Run and Long Run Aggregate Supply
 Morton 24: Introduction to SRAS
 Morton 28: Macroeconomic Model: Short Run to Long Run

Lesson 3: Brings AD, SRAS and LRAS together and the responses of the economy to shocks
and other changes, analyzes the effect Ad, SRAS shifts on the Price Level and Output
 Morton 25: Short Run Equilibrium and Output
 Morton 27: Manipulating the AS/AD model—Exogenous Shocks

Lesson 4: Relates the Long Run Aggregate Supply Curve to the Production Possibilities
Curve
 Morton 29: The Long Run Aggregate Supply and Production Possibilities Curves
IV. Financial Sector (15-20%)
A. Money, banking, and financial markets
1. Definition of financial assets: money, stocks, bonds
2. Time value of money
3. Measures of money supply
4. Banks and creation of money
5. Money demand
6. Money market
7. Loanable funds market
B. Central bank and control of money supply
1. Tools of central bank policy
2. Quantity theory of money
3. Real versus nominal interest rates
Major Objectives:
 Define the functions of money
 Identify the three categories of and components in the Money Supply
 Graph and explain the demand for money
 Graph and explain the supply of money
 Explain the equilibrium interest rate using the Money Market graph
 Graph and explain the loanable funds market
 Explain the equilibrium interest rate in the Loanable Funds Market
 Differentiate between the Money Market and the Loanable Funds Market
 Explain the process by which banks create money through loans
 Calculate and apply the money multiplier
 Explain the organization of the Federal Reserve
 Identify the tools of Monetary Policy used by the Fed
 Graph and differentiate between expansionary and contractionary monetary policy
6

Apply the tools of monetary policy to bring an economy back to equilibrium
Assigned Reading in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
11
Money and Banking
12
The Federal Reserve System
13
Money and the Economy
14
Monetary Policy
Pages
265-283
284-296
297-323
324-345
Homework
n/g # 1-5
n/g # 1-4
n/g # 5
Simulations:
 Money and Inflation
Lessons:
 Lesson 1: Intorudces Properties, functions, and definitions of money
 Morton 34: Money
 Morton 35: What’s All This About the Money Supply?

Lesson 2: Explores the relationship between the money supply and GDP
 Morton 36: Equation of Exchange

Lesson 3: Examines how banks create money through loans
 Morton 37: Multiple Expansion of Checkable Deposits

Lesson 4: Introduces the Federal Reserve System and its tools to control the money supply
 Morton 38: the Federal Reserve and the Mechanics of Monetary Policy

Lesson 5: Examines the money market and monetary policy
 Morton 39: The Money Market
 Morton 40: The Federal Reserve: Monetary Policy and Macroeconomics

Lesson 6: Differentiates between real and nominal interest rates and the effects of monetary
policy in the short and long run
 Morton 41: Real and Nominal Interest Rates
 Morton 42: Monetary Policy
V. Inflation, Unemployment, and Stabilization Policies (20-30%)
A. Fiscal and monetary policies
1. Demand-side effects
2. Supply-side effects
3. Policy mix
7
4. Government deficits and debt
B. Inflation and unemployment
1. Types of inflation (demand-pull, cost-push)
2. The Phillips Curve, short run vs. long run
3. Role of expectations
Major Objectives:
 Identify the types of lags in fiscal policy
 Define stabilizers
 Differentiate between automatic and discretionary fiscal policy
 Graph and differentiate between expansionary and contractionary fiscal policy
 Apply the tools of fiscal policy to bring an economy back to equilibrium
 Differentiate between the federal deficit and the federal debt
 Graph and analyze the effects of crowding out (using the money market and the loanable
funds graphs)
 Apply and compare monetary and fiscal policies used to bring an economy out of a
recessionary gap
 Apply and compare monetary and fiscal policies used to bring an economy out of an
inflationary gap
 Graph the Short and Long Run Phillips Curve
Assigned Reading in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
9
Economic Instability: A Critique of the SelfRegulating Economy
10
The Federal Budget and Fiscal Policy
15
Expectations Theory and the Economy
Read only the section on the Phillips Curve
Pages
215-240
241-264
346-350
Homework
n/g # 1-5
q/p # 5
Simulations:
 Fiscal Policy: A Two Act Play
Lessons:
 Lesson 1: Initiates the Study of Stabilization Policies
 Morton 30: Tools of Fiscal Policy
 Morton 31: Discretionary versus Automatic Fiscal Policy
 Morton 33: Analyzing the Macroeconomy

Lesson 2: Discusses lags associated with policy making and the issue of crowding out
 Morton 43: Monetary and Fiscal Policy
 Morton 44: Crowding Out: A Graphical Analysis

Lesson 3: Examines the interaction between monetary and fiscal policies
8


Morton 45: Graphing Monetary and Fiscal Policy Interactions
Lesson 4: Discusses the short run and long run Phillips curve and the relationship to the AD
and AS model
 Morton 46: The Short Run Phillips Curve
VI. Economic Growth and Productivity (5-10%)
A. Investment in human capital
B. Investment in physical capital
C. Research & Development, and technological progress
D. Growth policy
Major Objectives:
 Explain the role of resources in determining a nation’s long run growth
 Explain the role of human capital in a nation’s economic productivity and long run growth
 Explain the role of research and investment in capital in improving a nation’s long run
potential
 Discuss why economists disagree on which policies best help a nation grow
Assigned Reading in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
16
Economic Growth:
Resources, Technology, and Ideas
Pages
345-365
Homework
n/g #1-3
q/p # 1-2
Simulations:
 Productivity
Lessons:
 Lesson 1: Examines sources of economic grow and how fiscal and monetary policies
contribute to long term economic growth
 Morton 47: Economic Growth and the Determinants of Economic Productivity

Lesson 2 : Explains reasons between the differences in policies advocated by various
economists
 Morton 48: Why Economists Disagree
VII. Open Economy: International Trade and Finance (10-15%)
A. Balance of Payments
1. Balance of trade
2. Current account
3. Capital account
9
B. Foreign exchange market
1. Demand for and supply of foreign exchange
2. Exchange rate of determination
3. Currency appreciation and depreciation
C. Net exports and capital flows
D. Links to financial and goods markets
Major Objectives:
 Identify and explain the origin and goals of the World Trade Organization
 Identify and explain the goals of the North American Free trade Agreement (NAFTA)
 Identify common barriers to trade and the reasons why nations may employ them
 Differentiate between quotas and tariffs
 Calculate comparative advantage and terms of trade
 Graph and explain the impact of quotas and tariffs on domestic price levels and production
 Define and explain the components of
o Current account
o Capital account
o Balance of trade
o Balance of payments
 Explain how the international value of a currency is determined
 Graph a currency market
 Explain how fiscal and monetary policies effect the value of a currency in the international
sector
 Graph and analyze how changes in a nation’s currency effect the domestic economy
 Explain and graph the effects of changes in net exports on domestic aggregate demand
Assigned Reading in the Roger Arnold Textbook
 q/p= Questions and Problems
 n/g= Numbers and Graphs
Chapter
Title
31
International Trade
32
International Finance
Pages
721-738
739-768
Homework
n/g # 1
n/g # 1
Simulations:
 Comparative Advantage and Trade in a Global Economy
 Exchange Rates: Money Around the World
Lessons:
 Lesson 1: Reviews comparative advantage and the production possibilities curve
 Morton 49: Determining Comparative Advantage
 Morton 50: Economic Efficiency and Gains from Trade

Lesson 2: Examines the effects of government intervention on international trade
 Morton 51: Barriers to Trade
10

Lesson 3: Introduces the basics of international finance in discussing the balance of payments
and foreign exchange markets
 Morton 52: Imbalance of Payments
 Morton 53: Exchange Rates

Lesson 4: Explains the interaction of domestic stabilization policy and international trade and
finance
 Morton 54: How Monetary and Fiscal Policies Affect Exchange Rates
 Morton 55: The international Way of Thinking
11