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AP Macroeconomics Syllabus AP Macroeconomics is a one semester course that prepares students to pass the AP exam. The class meets five days a week. The beginning activity each day is a group five minute discussion of economic news. The main instructional method is lecture with questions and class discussion. Some class time is devoted to worksheets especially for students to illustrate their understanding by graphing correctly. There will be a test grade after each unit. Each test will contain multiple choice and free response questions. Most of the free response questions require graphing. Textbook – Economics, 15th edition McConnell-Brue. McGraw-Hill/Irvin 2002 Workbook – Advanced Placement Economics. Macroeconomic Student Activities. National Council on Economic Education 1996. Video series – Economics USA CR1 CR9 CR9 I. Introduction to economics – 15 days A. Why study economics 1. scarcity 2. principles of capitalism 3. basic economic terms and concepts 4. functions of money 5. value B. economic decision making 1. human want 2. factors of production 3. how choices are made a. alternative cost b. production possibilities 4. serving the needs of society a. market economy b. command economy c. traditional economy d. circular flow chart C. Demand, Supply, Pricing and Markets 1. law of demand 2. diminishing marginal utility 3. change in the quantity demanded 4. determinants of demand 5. elasticity of demand 6. supply CR3 CR2 CR3 CR5 CR3 CR9 CR3 CR9 a. law of supply b. elasticity of supply c. costs d. determinants of supply e. law of variable proportions 7. price determinants 8. shortages and surpluses 9. government pricing 10. economic markets 11. market failure II. GDP and National Income Accounting – 7 days A. GDP – what counts? B. shortcomings of GDP C. two approaches to GDP 1. expenditures 2. income 3. other national accounts D. nominal vs. real GDP E. consumer price index III. Business cycles, unemployment and inflation – 7 days A. business cycles and their causes B. business cycle indicators C. unemployment 1. Great Depression 2. determining the unemployment rate 3. criticism of the unemployment rate 4. types of unemployment 5. the GDP gap and Okun’s Law D. inflation 1. meaning and measurement 2. disinflation 3. deflation 4. history of US inflation 5. CPI and its criticisms 6. consequences of inflation 7. rule of 70 8. demand-pull 9. cost-push 10. Illustrations a. AS short run b. AS long run IV. The Keynesian model and the multiplier – 8 days A. Classical theory vs. Keynesian revolution B. Say’s law C. The General Theory CR9 D. E. F. G. H. I. J. K. CR9 CR8 CR9 CR5 CR8 the consumption function MPC and MPS determinants of consumption and savings investment expenditures 1. classical vs. Keynes 2. investment demand curve 3. why investment is unstable aggregate expenditures function the multiplier the balanced budget multiplier equilibrium vs. full employment GDP 1. recessionary gap 2. inflationary gap V. Aggregate Demand and Aggregate Supply A. aggregate demand defined 1. factors affecting AD 2. derivation of the AD curve from the AE model 3. determinants of AD – graphing and shifting B. aggregate supply defined 1. three ranges of the AS curve – in-depth analysis of each 2. determinants of AS – graphing and shifting C. equilibrium 1. changes in equilibrium 2. ratchet effect a. causes b. controversy VI. Fiscal policy – 6 days A. legislative mandate B. discretionary fiscal policy 1. expansionary 2. contractionary 3. remember the multiplier 4. financing deficits 5. disposing of surplus 6. debt retirement vs. idle surplus C. non-discretionary fiscal policy 1. stabilizers 2. examples D. problems with fiscal policy 1. timing 2. political 3. expansionary bias 4. crowding out effect 5. fiscal policy in the open economy 6. net export effect E. supply-side fiscal policy CR9 CR4 CR5 CR8 CR7 CR8 1. shifting AS to the right a. tax cuts b. less regulation 2. mainstream skepticism VII. Money, the Fed and Monetary Policy A. money 1. M1, M2, M3 2. stabilizing 3. demand for money B. The Federal Reserve 1. Board of Governors 2. FOM C 3. 12 federal reserve banks 4. fed functions C. money multiplier D. how banks create money E. monetary policy 1. objectives 2. tools a. open market operations b. reserve ration c. discount rate d. fed funds rate F. monetary policy, real GDP and the price level 1. easy money policy 2. tight money policy 3. policy effectiveness a. strengths b. problems i. cyclical asymmetry ii. changes in velocity 4. the international economy – net exports effect G. Monetarists vs. Keynesians VIII. International Trade – 7 days A. specialization and economic interdependence B. absolute advantage C. comparative advantage D. balancing payments and trade E. US trade deficit F. foreign markets and the value of currencies G. trade barriers H. free trade vs. protectionism I. international trade agreements IX. Controversy in macroeconomics – 8 days A. extending the analysis of AS CR5 CR9 CR6 1. short run, long run 2. equilibrium in the extended AD-AS model B. applying the extended AD-AS model 1. inflation 2. recession C. the Phillips Curve 1. stagflation 2. adverse supply shocks D. natural-rate hypothesis 1. Adaptive expectations theory 2. short run – long run Phillips Curve E. rational expectations theory F. supply-side economics G. classical vs. Keynes H. causes of macro instability 1. mainstream view. 2. monetarists MV=PQ 3. real business cycle view I. self-correction 1. new classical view 2. mainstream view 3. monetary rule 4. defense of discretionary stabilization X. Economic Growth A. ingredients of growth B. growth and production possibilities C. growth in the US 1. accounting for growth 2. detriments to growth D. growth policies Review of released AP Macroeconomics Exams – 3 days Resources and Assignments by Units CR2 CR9 I. Introduction to Economics McConnell-Brue – chapters 1-5 Video Economics USA – Resources and Scarcity; Markets and Prices Morton workbook Activity 1 pages 1-7 – production possibilities graphing Activity 6 pages 37-38 – pages 37-38 – circular flow Activity 2 pages 9-12 – demand curves and shifting Activity 3 pages 13-15 – supply curves and shifting Page 27 – essays and graphing II. GDP and National Income Accounting CR2 CR3 CR5 CR9 McConnell-Brue – chapter 7; Study questions 8, 9, 12, 13 Morton workbook Activity 9 pages 47-48 – GDP: what counts Activity 10 pages 49-53 – GDP and its cousins III. Business cycles, unemployment and inflation McConnell-Brue – chapter 8 Video Economics USA – Booms and Busts; Inflation Morton workbook Activity 8 pages 40-45 – CPI, adjusting nominal to real GDP Activity 12 pages 57-58 – who is helped or hurt by inflation Activity 13 page 59 – types of unemployment IV. The Keynesian Model and the Multiplier McConnell-Brue – chapters 9 and 10 Video Economics USA – John Maynard Keynes Morton workbook Activity 23 pages 99-100 – classical and Keynesian views of the economy Activity 25 page 101 – what is MPC? Activity 26 pages 107-109 – graphing investment Activity 27 pages 111-112 – magic of the multiplier V. Aggregate Demand and Aggregate Supply McConnell-Brue – chapter 11 Morton workbook Activity 16 pages 79-80 – AD graphing and shifting Activity 17 pages 81-82 – short run AS graphing Activity 18 pages 83-86 – graphing equilibrium price level and output; graphing price level and real GDP Page 133 – essay questions; AD-AS graphing CR5 CR4 CR5 VI. Fiscal Policy McConnell-Brue – chapter 12 Video Economics USA – fiscal policy Morton Workbook Activity 30 page 117 – discretionary and automatic stabilizers Activity 31 pages 119-120 – tools of fiscal policy Activity 32 pages 111-112 – two ways to analyze fiscal policy Activity 35 pages 123-125 – analyzing the macroeconomy VII. Money, the Fed and Monetary Policy McConnell-Brue – chapters 13, 14 and 15 Video Economics USA – the banking system; The Federal Reserve monetary policy Morton workbook Activity 36 pages 147-149 – monetary equation of exchange Activity 37 pages 151-152 – multiple expansion of demand deposits Activity 38 pages 153-155 – reserve requirement and the multiplier Activity 39 pages 157-160 – the Fed and monetary policy CR6 CR7 CR8 CR9 CR9 CR8 VIII. International Trade McConnell-Brue – chapters 6, 37, 38 Video Economics USA – international trade Morton workbook Activity 55 pages 229-230 – the Iowa car crop Activity 56 pages 231-234 – determining comparative advantage Activity 57 pages 235-236 – gain from international trade Activity 58 pages 237-239 – economic efficiency and the gains from trade Activity 59 pages 241-242 – barriers to trade Activity 60 pages 243-246 – imbalance of payments Activity 61 pages 247-248 – using foreign exchange rates Activity 62 pages 249-250 – using supply and demand to analyze exchange rates Activity 63 pages 251-252 – the international efforts of monetary and fiscal policies Activity 64 pages 253-254 – the international way of thinking IX. Controversy in Macroeconomics McConnell-Brue – chapters 16-19 Morton workbook Activity 49 pages 201-202 – supply-side economics, budget deficits and tax changes Activity 50 page 203 – analyzing short-run and long-run effects of monetary and fiscal policies Activity 51 pages 205-208 – why economists disagree Activity 52 pages 209-211 – sorting out macroeconomic theories Activity 53 page 213 – graphing macroeconomic theories Activity 54 page 215 – what should a president do? X. Economic Growth McConnell-Brue – chapter 17 Morton workbook Activity 46 pages 193-196 – economic growth and the determinants of productive capacity Activity 47 pages 197-198 – expansion of the 1960s