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A. P. Economics (APE)
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APE: The Course
Course Objectives
 Learn vs. Achieve
 3 Choices
The Choices
 One
 Teach to the test!!!!
 Two
 Think like an economist!!!!
 Three
 Reach for the stars!!!!
 Do Both.
 This is the correct answer.
The A. P. Economics Test
 2 separate Tests
 Microeconomics & Macroeconomics
 Scores (0-5)
 One Semester of college credit each
 May 17th, 2012
Course Focus
 Real world
 Application of material to current events
 Opening Q’s
 Test Preparation
 Problem sets
 Graphing
 Grading
What is economics?
 How to allocate limited resources with
unlimited wants and desires.
 Choices
 Incentives
 Costs vs. benefits
Areas of study
 Microeconomics
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Demand
Supply
Price equilibrium
Market structures
Sources of capital
 Macroeconomics
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Monetary policy
Fiscal policy
Government
International Trade
Performance
Challenges
Grading
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Participation
Tests
Homework
Group work
Current events/Readings
Investment portfolio
Honours paper
 Depends on completed
assignments within grading
period
Expectations
 Participate
 Adults
 Meet deadlines
 Have fun!
 Do well!
A Brief History of Economics
 The development of different schools of thought
Early Influences
 British Maritime Trade
Edmund Burke, British Parliament
“Some of the chief principles of commerce; such as
the advantage of free intercourse between all parts of
the same kingdom...the evils attending restriction and
monopoly...and that the gain of others is not
necessarily our loss, but on the contrary an advantage
by causing a greater demand for such wares as we
have for sale”
Alexander Hamilton, First U.S. Treasury
Secretary
“A national debt, if it is not excessive, will be
to us a national blessing.”
Adam Smith
 Wealth of Nations
(1776)
 Invisible Hand
 Laissez faire
 Growth of wealth
 Anti-government
 Fueled by growth of
labor pool
Smith leads to Birth of ….
 Economics
 Capitalism
 Classical
School of
Economic
Thought
Classical & Neoclassical
Economics
 Continued
Development (neo)
 Alfred Marshall
 Math
 Supply & Demand
 Positive or Good
Influences
 Market
 Trade
 Negative or Bad
Influences
 Government/taxes
 Trade restrictions
 Many Unknowns
Industrial Revolution
 Renowned for
Communist Manifesto
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Karl Marx
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(1848)
Politics based on
economic analysis
Labor & wealthy fighting
over profits
Increase in wealth at
expense of workers
Capitalism as unstable
Socialism
Downfall Of Neoclassical Economics
John Maynard Keynes
 Intellectual
 Challenged Treaty of
Versailles
 Gold Standard
Keynesian School of Thought
 The General Theory of Employment,
Interest & Money (1936)
 Business Cycle
 Government needed to guide
capitalism
 Father of modern economics & “mixed
economy.”
 Sammuelson 1948 Textbook
Bretton Woods
 1944 Allied Conference
 Creates Modern Financial System
 World Bank
 IMF
Keynesian Economics
 WW II - 70’s
 Monetary & Fiscal
Policy
 Government can help
 Great Society
Downfall Of Keynesian Economics
New Classical / Monetarism
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Milton Friedman - Creator of “Chicago School”
Expectations
Anti-Keynesian
Monetary Supply Growth equal to Economic Growth
Government is the problem
Efficient Market Hypothesis
 Assumptions:
 Efficiency
 The markets immediately incorporates all
information
 Rationality
 People act in a rational manner at all times
 Risk
 Since the market knows all, the only risk is how
closely does an investment follow the market
 Beta
Efficient Market Hypothesis
 Conclusions:
 Econometrics
 Mathematical Models
 Laissez-faire
 Economists enter the Boardroom & Wall Street
 Moderation
 Belief that proper Monetary Policy can override
the business cycle (& Keynesians too!)
 Greenspan
New Classical
 Econometrics
 Monetary Policy
 Anti-inflation
 Sustained Growth
 Laissez-Faire
 Underlying assumptions
problematic
Downfall Of the New Classical School
New Keynesian
 Addresses problems from New Classical
 Irrational Behavior
 Long-term vs. Short-term
 Market Inefficiencies
 Sticky Prices
The Ongoing Debate
Saltwater vs.
Fresh Water
Additional Readings
 Paul Krugman, Princeton University
 “How did Economists get it so wrong?” (NY Times
9/6/09)
 Gregory Mankiw, Harvard University
 “The Macroeconomist as Scientist & Engineer” (May
2006)
 John Cassidy, New Yorker Magazine
 After the Blow-up: Laissez-faire Economists do some
soul-searching & finger-pointing. (1/11/10)