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Submitted as partial fulfillment for the requirements of audit certification
Prescribed by the College Board, New York, New York
August, 2008
AP Macroeconomics
Sioux Falls operates on a semester system. AP Macroeconomics is a semester class and will be taught second
semester, until we add AP Microeconomics.
Mankiw, N. Gregory. Principles of Economics. (4th Edition). Thomson, Southwestern, 2007.
Readings and assignments are indicated in syllabus and are cited as Mankiw.
ISBN: 0-324-
Morton, John S. and Goodman, Rae Jean B. Advanced Placement Economics: Macroeconomics: Student
Activities. (3rd Edition). National Council on Economic Education, 2003. ISBN: 1-56183-567-6
Macroeconomics is a one semester (18 week) 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. Throughout the course, learning emphasis is placed on reasoned, logical argument.
AP Outline
Basic economic
concepts (8-14%)
Scarcity, choice and
opportunity cost
Production possibilities curve
Comparative advantage,
specialization, and trade
Demand, supply and market
Macroeconomic issues;
business cycle,
unemployment, inflation,
Mathematical/Graphical Skills
Graph a production possibility
Explain the shapes of the
production possibilities
Explain how the production
possibilities model shows
scarcity, choice, and cost.
Interpret selected points on
the production possibilities
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
gains from trade
Specific Learning Tasks
Sample Problems
Use the production possibilities
frontier to illustrate the
economic problem.
Topic: Production
possibilities frontier
Scarcity, choice, cost
Free lunches vs. trade offs
Calculate opportunity cost.
Topic: Opportunity cost
Increasing vs. constant cost
Define efficiency and describe
an efficient use of resources.
Topic: Efficiency
Technical or productive
Allocative efficiency
Explain how people gain from
specialization and trade.
Topic: Specialization
Absolute vs. comparative
Gains from trade
Explain how technological
change and increases in
capital and human capital
expand production
Topic: Economic growth and
the pff.
Read: Mankiw
Chapter 1-Ten Principles of
Chapter 2-Thinking Like an
Chapter 3-Interdependence
and the Gains from Trade
Chapter 4-The Market Forces
of Supply and Demand
Essential Questions
What are the economic
goals of any society?
How does a production
possibilities model illustrate
the economic problem of
scarcity, choice, and cost?
What are the
guideposts to economic
Why do people trade?
Why is equilibrium
important in a market
How do government
price ceilings, supports, and
taxation affect equilibrium
price and quantity?
What is marginal utility
and how does in determine
what consumers will buy?
Sample Activities
Morton, Unit I
Sample AP Economics Test
2003 Interpret PP on two
countries; determine
advantage and terms of
trade; determine
exports/imports and explain
benefits of trade.
AP Outline
Economic Performance (1216%)
Circular flow
Gross domestic product;
components of GDP,
National income concepts.
Real versus nominal gross
Inflation measurement and
Price indices
Nominal and real values
Cost of inflation
Definition and measurement
Types of unemployment
Natural rate of
Mathematical/Graphical Skills
Draw and explain
circular flow models
Compute and
interpret price indexes
(CPI, and GDP deflators)
Convert nominal data
to real data
Compute GDP and
NNP given novel data
unemployment rates from
labor force participation
Calculate rate of
inflation between years
Chief Reader Formative Signal:
Understand link
between expenditures and
income (circular flow model)
Specific Learning Tasks
Sample Problems
Define GDP and explain why
the value of production,
income and expenditures are
the same for an economy
Expenditure Approach
Income Approach
Explain the circular flow model
and use the model to explain
how households, firms,
government and international
markets interact (to
constitute GDP)
Distinguish between nominal
GDP and real GDP
Explain and describe limitations
of real GDP as a measure of
economic well being.
Explain what the consumer
price index is and how it is
Explain limitations of the CPI
Use the CPI to explain inflation
and to calculate real values
(wages, interest rates,
Define unemployment rate and
its relationship with GDP
Describe sources and types of
Read: Mankiw
Chapter 23, Measuring a
Nation’s Income
Chapter 24, Measuring the
Cost of Living
Chapter 28, Unemployment
Essential Questions:
What are the measures of
national economic
How can we measure the
level of real performance?
Who is helped and who is
harmed by inflation?
How does a circular flow
describe the economy of
the United States?
What is meant by
Sample Activities
Morton, Unit II
Sample AP Economics Test
1997, draw and label circular
flow diagram; identify
components of AD and AS;
1997, identify two ways of
calculating GDP (income
vs. expenditure approach).
1999, identify method of
calculating GDP; identify
shortcomings of GDP
figure; evaluate growth of
GDP; show effects of
investment on ppf
AP Outline
Specific Learning Tasks
Sample Problems
National Income and Price
Determination (10-15%)
A. Aggregate demand
Determinants of aggregate
Multiplier and crowding-out
B. Aggregate Supply
Short run and long run
Stick versus flexible wages
and prices
Determinants of aggregate
C. Macro economic
Real output and price level
Short and long run
Actual versus full employment
Economic fluctuations
Explain the factors that
constitute a downward
sloping Aggregate Demand
Income, real interest rates,
and net exports effects
Explain the factor that
influences the AD.
Explain the factors that
constitute an upward sloping
Aggregate Supply (AS) curve
Explain the factors that
influence the aggregate
supply curve
Use the AS/AD model to
explain fluctuations in the
Aqs=Aqd constitutes
equilibrium in the economy
(LR) Explain distinctions
between potential GDP and
actual GDP
Relationship between
potential GDP and
investment and capital;
labor markets
Aqs=Aqd constitutes
equilibrium in the economy
and now compare/contrast
with real GDP.
(LR) Explain distinctions
between natural rate of
employment or full
employment and actual rate
of unemployment
Relationship between AS/AD
model and unemployment
Introduce and explain
aggregate expenditure
model (Keynesian Income
Expenditure Model) with
fixed prices.
Distinguish between
autonomous expenditures
and induced expenditures
and how it influences GDP
Explain how GDP adjust to
Describe and explain the
expenditure multiplier
Derive AD form the
expenditure model
Read: Mankiw
Chapter 33, Aggregate
Demand and Aggregate
Mathematical/Graphical Skills
Draw and explain the
components of a circular
flow model; explain how the
components are related to
national income and GDP
concepts (1997)
Draw and explain an AS/AD
model at various levels of
unemployment. (1998)
Graph the changes in the
AS/AD model given
changes in SRAS, AD, and
Graph an income expenditure
model (Keynesian cross)
and how it is related to
AS/AS model
Given a multiplier effect, show
changes in the Keynesian
and AS/AD model
Compute multiplier given
simple models, models with
marginal tax rates, and in
complete models.
Chief Reader Formative Signal:
differentiate secondary effects
(increase in price levels in
NNP which cause Md to
increase) from the increase
in demand for loanable
Essential Questions
What are the different models
that explain the status of the
national economy?
How does each of the models
suggest a method and
strategy for dealing with
national economic
How does the AS/AD model
compare with the Aggregate
Expenditure Model
(Keynesian Model) as they
attempt to explain the
national economy
How does the AS/AD model
compare with the Keynesian
model as they attempt to
explain the national
Sample Activities
Morton, Unit III
Sample AP Economics Test
2005B Graphs a state of LRE,
and then analyzes the
impact of a decline in Xn
(recognizing that recession
in foreign country decreases
demand for US products);
shows impact on domestic
1998, Use of AS/AD to show
FE economy and impact of
increase in AD ;graph
AS/AD economy at FE
AP Outline
Specific Learning Tasks
Sample Problems
National Income and Price
Determination (1015%)continued
understand the multiplier
effect and how it works
differentiate between changes
in SR and LR investment
given fiscal/monetary
understand simultaneous
shifts in AS and AD lead to
indeterminate price levels
Financial Sector (15-20%)
Money, banking and financial
Definition of financial
assets: money, stocks,
Time value of money
Measures of money supply
Banks and creation of
Money demand
Money market
Loanable funds market
Central Bank and control of
the money supply
Tools of central bank
Quantity theory of money
Real versus nominal
interest rates
Mathematical/Graphical Skills
Chart and explain what
happens to excess reserves,
required reserves, and
lending ability when demand
deposits are made by
Graphically illustrate
the effects on money supply
and interest rate with an
increase/decrease in the
money supply
Show transmission
mechanism of monetary
policy within a Keynesian
model and within the
monetarist model.
Define money and
describe its functions
Describe the
momentary system and
explain the functions of
Balance sheets
Required and Excess
Money creation and
destruction through loans
and repaying loans
Deposit Money Multiplier
Loanable fund market and
LR interest rates
Describe and explain the time
value of money
Bond market
Money demand
Money market and SR
interest rates
Describe the functions of the
Federal Reserve System.
Tools of the FED; open
market operations;
required reserves;
discount rates
Creation of nominal interest
rates by the FED
Read: Mankiw
Chapter 26, Savings,
Investment, and the Financial
Chapter 27, The Basic Tools of
Chapter 29, The Monetary
Essential Questions:
How do banks operate?
How does the FED promote a
fully employed economy?
Sample Activities
Morton, Unit IV
Sample AP Economics Test
1996, explain impact of a
deposit on bank reserves,
loaning ability and total
money supply
2006B Graphs loanable fund
market given a changes in
savings rate of consumers
and impact on real interest
rates; and impact on LRAS;
(2) Explains impact on the
MS given a new DD;
explains leakages within the
banking system and impact
on loans and new MS
created; explains impact on
MS and MD with an increase
in government spending
financed by sale of bonds to
the central bank
AP Outline
Financial Sector (15-20%)
Chief Reader Formative Signal:
differentiate secondary effects
(increase in price levels in
NNP which cause Md to
increase) from the increase
in demand for loanable
understand the multiplier effect
and how it works
differentiate between changes
in SR and LR investment
given fiscal/monetary
Unemployment, and
Stabilization Policies (2030%)
Fiscal and monetary policies
Demand side effects
Supply side effects
Policy mix
Government deficits and
Inflation and unemployment
Types of inflation
Demand-pull inflation
Cost push inflation
The Phillips curve: short
run and long run
Role of expectations
Mathematical/Graphical Skills
the short run trade offs
between inflation and
unemployment (Phillips
Use an AS/AD illustration with
an increase in AD to explain
the movements along a
Phillips Curve.
Using the Phillips Curve, graph
how changes in the AS/AD
model would appear on the
Phillips Curve Model.
Graphically illustrate, how
expectations affects the
Phillips Curve model
Graph the affects of a
combined monetary and
fiscal policy.
Specific Learning Tasks
Sample Problems
Explain fiscal policy
measures in response to (a)
recessions; (b) inflationary
periods; (c) stagflation
Use AS/AD analysis
Explain monetary policy
measure in response to (a)
recessions; (b) inflationary
periods; (c) stagflation
Use AS/AD analysis
Show and explain the
Keynesian transmission
(interest rate changes to
investment changes to
changes in AD)
Show how monetary policy can
offset or complement fiscal
policy goals.
Using a SR Phillips Curve
Analysis, describe the short
run trade off of inflation and
Distinguish between the sort
run and the long run Phillips
curve and describe the
shifting tradeoff between
inflation and unemployment
Explain the role of expectations
and how expected inflation
influences the short run trade
Compare and contrast the trade
offs using the Phillips curve
analysis with that of using the
AS/AD model.
Read: Mankiw
Chapter 30, Money
Growth and Inflation
Chapter 34, The
Influence of Monetary and
Fiscal Policy on Aggregate
Chapter 35, The Shortrun Trade-off Between
Inflation and Unemployment
Essential Questions
are the different combinations
of fiscal and monetary policy?
What are the affects of using
monetary policy and/or fiscal
policy on interest rates, price
stability, and employment and
national income?
What are the various policies
used to promote national
output, employment and price
How do economists measure
What causes (and does not
cause) inflation?
What is the trade off between
unemployment and inflation?
What is the role of expectations
in accelerating (or
decelerating) inflation?
Sample Activities
Morton, Unit III, Activities 3033.
Morton, Unit IV, Activities 40
and 41
Morton Unit V
AP Outline
Unemployment, and
Stabilization Policies (2030%)
Compare and contrast affects
of monetary policy and/or
fiscal policy given differing
elasticity of demand for
investment demand and/or
demand for money
Compare and contrast
graphically the Keynesian
and Monetarist
controversies concerning the
use of fiscal and monetary
Chief Reader Formative Signal:
explain expansionary fiscal
policy that requires
government to fund sale of
securities which increase
interest rates
explain expansionary fiscal
policy that requires
government to fund sale of
securities which increase
interest rates
understand simultaneous shifts
in AS and AD lead to
indeterminate price levels
Specific Learning Tasks
Sample Problems
Sample AP Economics Test
1999, how changes in interest
rate changes aggregate
output and price levels;
identify a fiscal policy to
counter effects of inflation
and effects of such policy on
output, price level and
nominal interest rates and
price of bonds
2003, draw SRAS/AD graph
showing recession with FE
output, current and current
price levels; graphs and
explains impact of decrease
in fiscal spending on output
and price levels and affects
on unemployment
2005B recommends an OMO
given recession and
graphically illustrates change
in money market and interest
rates and how it will affect
AD, price levels and output
2005 ,draw a short run 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
employment and the
relationship between U and
inflation in the long run.
AP Outline
Economic growth and
productivity (5-10%)
Investment in human capital
Investment in physical
Research and development,
and technological
Growth policy
Mathematical/Graphical Skills
Graph affects on price stability,
employment and growth
given an increase in the long
run aggregate supply.
Show how increases in LRAS
affect production possibilities
model (1998)
Show growth recessions using
AS/AD models.
Recognizes shifts in LRAS
given novel changes in
capital stock, technology,
Chief Reader Formative Signal
understand why and how
economic growth occurs
understand how GDP increases
as a result of increases in AD
and/or with economic growth
(increases in LRAS)
understand that growth occurs
in the productive capacity
recognize relationships
between capital stock and
distinguish between short run
and long run facts that
change economic growth
Specific Learning Tasks
Review the concept of potential
output (LRAS)
Explain the concept of
economic growth
Define and explain the
relationship among capital,
investment, saving and
economic growth
Reinforce how investment and
savings decision are made to
determine real interest rates
Reinforce how government
influences the real interest
rate, investment and savings
Explain how the labor market
contributes to economic
potential and growth
Identify sources of economic
growth and theories of
economic growth
Use AS/AD analysis to describe
effects of economic growth.
Describe policies that might
promote economic growth
Sample Problems
Read: Mankiw
Chapter 25, Production and
Essential Questions
What is economic growth?
What factors can result in
economic growth?
What government policies have
been used (and can be
used) to stimulate economic
Sample Activities
Morton, Unit VI
Sample AP Economics Test
2002, can explain how LRAS
changes or how increases in
real GDP can be changed
(e.g., labor force
participation; increase in
government deficits;
decrease in inputs required
to produced outputs;
increase in educational;
increase in rate of savings)
AP Outline
Open Economy:
International Trade and
Finance (10-15%)
A. Balance of payments
Balance of trade
Current account
Capital account
B. Foreign exchange
Demand for and supply of
foreign exchange
Exchange rate determination
Currency appreciation and
C. Next exports and
capital flows
D. Links to financial and
goods market.
E. International finance
and exchange rates
Specific Learning Tasks
Mathematical/Graphical Skills
Graph demand and supply for
US currency AND demand
and supply for foreign
Graph the impact of an
increase/decrease in net
exports on AS/AD models.
Graph impact of an appreciated
dollar/depreciated dollar on
Graph the impact of tariffs
Chief Reader Formative Signal
students must be able to
analyze effects of
monetary/fiscal policies on
exports, imports, and
international value of the
understand why demand for
imports/exports occur
understand link between capital
flows and currency values;
differentiates between
money market and foreign
markets; differentiates
between money market and
foreign market.
link changes in international
value of the dollar with
changes in imports/exports
Explain why nations
trade (distributive practice
from beginning of course,
emphasis on comparative
advantage and terms of
Explain benefits of trade
Explain trade barriers (tariffs
and quotas) and how the
reduce trade
Give arguments for/against
Explain the balance of trade
and how the balance of trade
determines the international
borrowing and lending
Explain exchange rates and
how they are determined and
why they fluctuate
Explain and link foreign trade to
the AS/AD model.
Explain and link how
monetary/fiscal policy affects
international trade and the
balance of payments.
Sample Problems
Read: Mankiw
Chapter 31, Open-Economy
Macroeconomics: Basic
Chapter 32, A Macroeconomic
Theory of the Open Economy
Essential Questions
Why do nations engage in
international trade?
Why do nations sometimes
impose restrictions on
international trade?
How do exchange rates affect
international trade?
What is the affect of
international markets on the
US economy in terms of
price stability, employment,
and economic growth?
What is a trade deficit?
Sample AP Economics Test
2002, can use demand and
supply analysis in foreign
money market to show
changing value of dollars v.
the value of foreign currency;
can show how a change
international value of dollars
changes imports and exports
from a foreign country
2003, explain how changes in
interest rates (decrease)
affects international value of
dollar; exports and imports
AP Outline
Open Economy:
International Trade and
Finance (10-15%) continued
explain changes in
exports/imports due to
relative price changes
recognize and explain financial
flows given changes in
interest rates between
Specific Learning Tasks
Sample Problems