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AP® Macroeconomics Syllabus/Course expectations and guidelines AP® Macroeconomics provides students with a thorough understanding of the principles of economics that apply to an economic system as a whole. The course places particular emphasis on the study of national income and price-level determination, and also develops students’ familiarity with economic performance measures, the financial sector, stabilization policies, economic growth, and international economics. This is a one semester, 18week course, designed to prepare students for the AP Exam. COURSE DESCRIPTION/OVERVIEW This course aims to: 1) provide an intensive study of basic economic principles and Macroeconomics tools, and their application to national economies; 2) instruct students on how to generate, interpret, label, and analyze graphs, charts, and data to describe and explain economic concepts; and, 3) further develop critical thinking skills while examining different perspectives of macroeconomic economic theory. (For specific areas see Course Plan/Outline below.) Course Materials include: McConnell, Campbell R. and Stanley L. Brue. Economics, Principles, problems, and policies, 17th ed. New York: McGraw-Hill/Irwin, 2008. Selected articles from the New York Times, Los Angeles Times, Wall Street Journal, and other periodicals. Economics USA, video series. Other selected media including news items relevant to the course topics. Instructor handouts including data in a variety of forms and sources for analysis and interpretation. Student performance will be evaluated in the following areas: chapter quizzes, homework, participation, final exam. Weekly chapter quizzes will include both multiple choice and free-response questions. All students in this course are expected to register and take the AP® Exam. COURSE PLAN/OUTLINE The course consists of six basic units. An outline of course objective topics, required readings, and “graphs of focus” is included below. Relevant news items will also be discussed on a weekly basis. UNIT I. BASIC ECONOMIC CONCEPTS—2-3 weeks Topic A: Includes: Reading: Graph: The economic perspective: limits, alternatives, choices, trade-offs Scarcity, choice, and opportunity costs; marginal analysis; macro and micro; factors of production Chapter 1, pages 4-11 Graphs and their meaning (pp21-25) Topic B: Reading: Graph: Production possibilities model Chapter 1, pages 11-18 Production possibilities curve (frontier) (p12) Topic C: Includes: The Market System and the Circular Flow Command v. Market Systems, Characteristics, Fundamental Questions, Invisible Hand, and the Circular flow model Chapter 29, pages 29-41 Circular Flow (p39) Reading: Key diagram: Topic D. Reading: Graphs: Demand, supply, and market equilibrium Chapter 3, pages 45-61 Demand and supply curves showing equilibrium; demand and supply curves showing shifts in demand/supply (pp45-61) Topic E: Includes: Reading: Graphs: The United States in the Global Economy Overview of comparative advantage, absolute advantage, specialization, and exchange. Chapter 5, pages 85-99 U.S trade and GDP (p86), Market for yen (p93) UNIT II. MACROECONOMIC ISSUES AND MEASURING ECONOMIC PERFORMANCE—2-3 weeks Topic A: Includes: Reading: Graphs: Measuring Domestic Output and National Income Gross Domestic Product National income accounts, Circular flow, Gross Domestic Product; Components of gross domestic product; Real versus nominal gross domestic product Chapter 6, page 106-121 U.S. domestic output and the flows of expenditure and income (p155) Topic B Includes: Reading: Diagrams: Economic growth and the business cycle Growth and the business cycle, recession, trough, recovery, unemployment, inflation Chapter 7, pages 125-129 Annual growth rates (p127), Business Cycle (p127) Topic C: Includes: Reading: Graphs: Unemployment Definition and measurement; Types of unemployment; Natural rate of unemployment Chapter 7, pages 129-134 GDP and unemployment (p132) Topic D: Includes: Reading: Graphs: Inflation measurement and adjustment Price indices; Nominal and real values; Costs of inflation Chapter 7, pages 134-141 Inflation in five nations (p135), U.S. Annual inflation rates (p136) Topic E: Includes: Reading: Graphs: Basic Macroeconomic relationships Income-Consumption and Income-Savings, Interest Rate-Investment, Multiplier Effect Chapter 8, 147-162 Consumption and disposable income (p147), Consumption and Savings schedules (p149), Investment demand curve (p155) UNIT III. MACROECONOMIC MODELS AND FISCAL POLICY—2-3 weeks (Includes National Income and Price Determination) Topic A: Includes: Reading: Graphs: Aggregate Expeditures Model Consumption and Investment Schedules, Equilibrium GDP, Other features, Adding trade Chapter 9, pages 167-181 Equilibrium GDP (p170), Net exports and equilibrium GDP (p174), Government spending and equilibrium GDP (p177), Taxes and equilibrium GDP (p174), Recessionary and inflationary expenditure gaps (p180) Topic B: Includes: Reading: Graphs: Aggregate demand Determinants of aggregate demand, Multiplier and crowding-out effects Chapter 10, pages 188-191 Aggregate demand curves (p188, p190) Topic C: Includes: Reading: Graphs: Topic: D: Includes: Reading: Graphs: Aggregate supply Short-run and long-run analyses, Sticky versus flexible wages and prices, Determinants of aggregate supply Chapter 10, pages 192-196 Aggregate supply curves (p192, p193, p194) Macroeconomic equilibrium Real output and price level, Short and long run, Actual versus full-employment output, Economic fluctuations Chapter 10, pages 196-20 The equilibrium price and equilibrium real GDP (p197), AD and demand pull inflation (p198), AD and recession (p198), AS and cost-push inflation (p200), Growth, full employment, and relative price stability (p200), Relationship of the AD curve and the Aggregate Expenditures Model (p205207) Topic E: Includes: Reading: Graphs: Fiscal policy, Deficits, and Debt Fiscal policy and AD-AS Model, Problems, Deficit spending, Public debt, Crowding out-effect Chapter 11, pages 209-222 Expansionary and Contractionary fiscal policies (p209, p210), Built-in stability (p212), Standardized deficits (p214), Investment demand and crowding-out (p222) UNIT IV. MONEY, BANKING, AND MONETARY POLICY (Financial Sector)—2-3 weeks Topic A: Includes: Reading: Graphs: Money, banking, and financial markets Definition of financial assets: money, stocks, bonds; Time value of money (present and future value), Measures of money supply Chapter 12, pages 229-240 World’s 12 largest financial institutions Topic B: Includes: Reading: Graphs: Money creation Banks and creation of money, Money demand, Money market, and Loanable funds market Chapter 13, pages 245-254 Expansion of the money supply by commercial banking system (p253) Topic C: Includes: Reading: Graphs: Central bank and control of the money supply Tools of central bank policy, Quantity theory of money, Real versus nominal interest rates Chapter 14, pages 259-279 Demand and supply of money, and equilibrium interest rate (p260), Monetary policy and equilibrium GDP (pp270-271), The AD-AS Theory of price level, real output, and stabilization policy (pp276-277) UNIT V. OTHER LONG RUN PERSPECTIVES AND MACROECONOMIC DEBATES—2-3 weeks Topic A: Includes: Inflation, Unemployment, and Stabilization Policies Inflation and unemployment, types of inflation, Demand-pull inflation, Cost-push inflation, The Phillips curve: short run versus long run, Role of expectations Chapter 15, pages 286-299 Aggregate demand/aggregate supply model (p287, p288, p289, p290), Phillips curve (p291, p294), Laffer curve (p296) Reading: Graphs: Topic B: Includes: Reading: Graphs: Economic Growth and Productivity Investment in human capital, Investment in physical capital, Research and development, and technological progress, Growth policy Chapter 16, pages 303-317 Economic growth and the production possibilities curve (p303), Production possibilities and longrun AS (p305) Topic C: Disputes over Macro theory and policy Includes: Fiscal and monetary policies (Demand-side effects, Supply-side effects, Policy mix, Government deficits and debt) Reading: Chapter 17, pages 321-334 Graphs: Classical and Keynesian view of the macroeconomy (p321), The real-business-cycle theory (p325), New classical view of self-correction (p327), rationale for monetary rule (p331) UNIT VI. INTERNATIONAL TRADE AND FINANCE—2-3 weeks Topic A: Includes: Reading: Graphs: International Trade: the economic basis Key Facts, Net exports and capital flows, Comparative Advantage Chapter 35, pages 676-682 Production possibilities for U.S. and Brazil (p678), Trading possibility lines and the gains from trade (p680) Topic B: Reading: Graphs: Supply and Demand Analysis of Exports and Imports Chapter 35, pages 682-685 U.S. and Canadian export supply and import demand (pp683-684), Equilibrium world price and Quantity of exports and imports (p685) Topic C: Includes: Reading: Graphs: Trade Barriers and protection. Impact and cost of tariffs and quotas, the case for protection, WTO Chapter 35, pages 685-692 Effects of a protective tariff or an import quota (p686) Topic D: Includes: Reading: Graphs: Balance of payments accounts Balance of trade, Current account, Capital and financial account Chapter 36, pages 697-700 U.S. Trade Balances in Good and Services (p699) Topic E: Includes: Foreign exchange market Demand for and supply of foreign exchange, Exchange rate determination, Currency appreciation and depreciation, Links to financial and goods markets Chapter 36, pages 700-714 The market for foreign currency (p702), Adjustments under flexible exchange rates and fixed exchanged rates (p703), U.S. Trade deficits (p711) Reading: Graphs: