Syllabus

AP © Macroeconomics This is an open enrollment, college level course aimed toward the advanced placement exam. An AP course in Macroeconomics is designed to give students a thorough understanding of the principles of economics that apply to an economic system as a whole. Such a course places particular emphasis on the study of national income and price determination, and also develops students’ familiarity with economic performance measures, economic growth, and international economics. A summer assignment will be part of this course. Texts Krugman, Paul, and Robin Wells. //Macroeconomics(1st edition).// New York: Worth Publishers Morton, John and Rae Jean Goodman. //Advanced Placement Economics (3rd Edition)//. New York: NCEE Anderson, David and James Chasey. //Favorite Ways to Learn Economics (2nd Edition).// Ohio, Thomson South-Western // Topic I. Basic Economic Concepts // ** [CR1] ** A. Scarcity, choice and opportunity cost B. Production possibilities curve C. Comparative advantage, absolute advantage, specialization and exchange D. Demand, supply and market equilibrium E. Macroeconomic issues: business cycle, unemployment, inflation growth
 * CR1 – The course provides instruction in basic economic concepts ||
 * Course Topics **

// Key Terms: // Economy, economics, market economy, invisible hand, microeconomics, macroeconomics, market failure, recession, macroeconomics, economic growth, scarcity, factors of production, resource, scarcity, opportunity cost, trade off, incentive, gains from trade, specialization, equilibrium, comparative advantage, absolute advantage , positive economics , normative economics , demand, law of demand, supply law of supply, quantity demanded, quantity supplied, market equilibrium, market clearing price , equilibrium price, substitutes, compliments, normal goods, inferior goods, inputs, surplus, shortage, price ceiling, price floor, minimum wage, inefficient, quota , excise tax , business cycle, expansion, recovery, recession, contraction, depression, peak, trough, unemployment, inflation
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||

// Key Graphs //** [CR9] ** - Production Possibilities Frontier - Supply Model and Demand Model (derived from Supply Schedule and Demand Schedule) - Market Equilibrium Model including shifts in both Supply and Demand // Topic II. Measurement of Economic Performance //** [CR2] ** A. National income accounts 1. Circular flow 2. Gross domestic product 3. Components of gross domestic product 4. Real versus nominal gross domestic product 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 // Key Terms: // Circular flow, factor markets, product markets, firms, households, Gross Domestic Product, national income accounting, Gross National Product, expenditure approach to GDP, income approach to GDP, value added approach to GDP, nominal values, real values, nominal GDP, real GDP, GDP per capita, final goods, intermediate goods, double counting, consumption spending, investment spending, government spending, net exports, transfer payments, depreciation , disposable income, price index, market basket, inflation, deflation, GDP deflator, purchasing power, real value of money, Consumer Price Index, demand pull-inflation , cost push inflation , nominal wages, real wages, unemployment, structural unemployment, cyclical unemployment, frictional unemployment, labor force participation rate , full employment, leakages.
 * CR2- the course provides instruction in measurements of economic performance. ||
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||

// Key Graphs and Formulae //** [CR9] ** - Circular Flow of Economic Activity - Business Cycle - Y = C + I + G + Nx // Topic III. National Income and Price Determination //** [CR3] **  A. Aggregate demand 1. Determinants of aggregate demand 2. Multiplier and crowding-out effects B. Aggregate supply 1. Short-run and long-run analyses 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 // Key Terms: // Classical Economics, Keynesian Economics, supply-side, demand-side, Keynesian Equilibrium, consumption function, planned aggregate expenditures, aggregate expenditures, average propensity to consume, average propensity to save, marginal propensity to consume, marginal propensity to save, injection, investment multiplier, government multiplier, tax multiplier, simple multiplier, investment demand, aggregate demand, aggregate supply (short run and long run), potential output , wealth effect, interest rate effect, exchange rate effect, macroeconomic equilibrium (short run and long run), shocks, recessionary gap, inflationary gap, price level, externalities.
 * CR3 – This course provides instruction in national income and price determination. ||

// Key Graphs and Formulae //** [CR9] ** // - // MPC = ∆C/∆DI - APC = C/DI - MPS = ∆S/DI  - APS = S/DI - Investment demand Curve - Aggregate demand and short run aggregate supply curve. - Aggregate demand and the long run aggregate supply curve. - Keynesian Cross (Aggregate Expenditures Model) - 3 Stage short run supply curve (Keynesian range, intermediate range, Classical range) // Topic IV. Financial Sector //** [ **** CR4] **  A. Money, banking, and financial markets 1. Definition of financial assets: money, stocks, bonds  2. Time value of money (present and future value) 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 the money supply 1. Tools of central bank policy 2. Quantity theory of money  3. Real versus nominal interest rates  // Key Terms // Money, currency, three functions of money, characteristics of money, monetary standard, gold standard, silver standard, fiat currency , M1, M2, M3, interest rate (real vs nominal), loanable funds, crowding out , liquidity, loan, stock, bond, mutual fund, common stock, preferred stock , deposits, money supply, money demand, reserves, reserve ratio, bank run, FDIC, excess reserve , money multiplier, central bank, federal funds market, federal funds rate, discount rate, OMO(open market operations), velocity, Federal Reserve System // Key Graphs and Formulae //** [CR9] ** - Money Market - Loanable Funds Market // Topic V: Inflation, Unemployment and Stabilization Policies //** [CR5] **  A. Fiscal and monetary policies 1. Demand-side effects 2. Supply-side effects 3. Policy mix 4. Government deficits and debt B. Inflation and unemployment 1. Types of inflation a. Demand-pull inflation b. Cost-push inflation 2. The Phillips curve: short run versus long run  3. Role of expectations  // Key Terms // Fiscal policy (expansionary and contractionary), automatic stabilizers, discretionary fiscal policy, countercyclical fiscal policy, progressive taxation, regressive taxation, proportional taxation , crowding out, Federal Reserve Board of Governors, Open Market Operations, expansionary monetary policy, Contractionary monetary policy, monetary neutrality , Monetarist economists., Federal Reserve System, Philips Curve (short run and long run), Rational Expectations theory , Okun’s Law
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||
 * CR4- This course provides instruction in the financial sector. ||
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||
 * CR5 – This course provides instruction in inflation, unemployment and stabilization policies. ||
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||

// Key Graphs and Formulae //** [CR9] ** - Phillips Curve - AD/ AS Model - Money Market (Manipulations) // Topic VI: Growth and Productivity //** [CR6] **  A. Investment in human capital B. Investment in physical capital C. Research and development, and technological progress D. Growth policy
 * CR6 – This course provides instruction in economic growth and productivity. ||

// Key Terms // Rule of 70, labor productivity, physical capital, human capital, technology, economies of scale , infrastructure, efficiency.
 * CR9- The course teaches students how to generate, interpret, label and analyze graphs, charts and data to describe and explain economic concepts. ||

// Graphs and Formulae //** [CR9] ** - Production Possibilities Frontier - Long Run AD/AS model
 * CR8 – This course promotes the understanding of aggregate economic activity; the utilization of resources within and across countries; and the critical evaluation of determinants of economic progress and economic decisions made by policy makers. ||

// Topic VII: International Trade and Finance //** [CR7] ** A. Balance of payments accounts  1. Balance of trade 2. Current account 3. Capital account B. Foreign exchange market 1. Demand for and supply of foreign exchange 2. Exchange rate determination 3. Currency appreciation and depreciation C. Net exports and capital flows  D. Links to financial and goods markets  // Key Terms: // Imports, exports, Ricardian model of international trade, autarky, comparative advantage, absolute advantage, tariffs, quotas, free trade, protectionism ,WTO, GATT, NAFTA, exchange rates (fixed and floating), trade deficit, world price, domestic price, balance of payments, foreign exchange market, depreciation, appreciation, equilibrium exchange rate, parity of purchasing power, devaluation **[CR8]**
 * CR7 – This course provides instruction in the open economy. ||

// Key Graphs //** [CR9] ** // - // Exchange Rate Market -Domestic and Foreign Money Supply Market

// Course Structure // // Unit 1: Introduction to Economic Thought (2 weeks) // // Chapters Covered in Unit 1 // Krugman: Chapters 1 & 2 Anderson: Activities 1A, 1B; Problem Sets 1.1, 1.2, 1.4, 1.5, 1.6

// Concepts Covered: // Thinking economically, micro vs macro, positive vs normative economics, scarcity, opportunity cost, production possibilities, production possibilities frontier, absolute and comparative advantage, specialization, gains from trade, market vs command vs traditional vs mixed economies.

// Unit 2: Supply and Demand (3 weeks) // // Chapters Covered in Unit 2 // Krugman: Chapters 3,4,5 Anderson: Activities 2.B; Problem Sets 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10 Morton: //A Market in Wheat, Activities : 3,4,5,6,7,8//

// Concepts Covered: // Demand schedule, law of demand, demand vs quantity demanded, determinants of demand, demand curve, supply schedule, law of supply, supply vs quantity supplied, determinants of supply, supply curve, market equilibrium (clearing price and quantity), shifting the S and D curve, price floors, price ceilings

// Unit 3: Measuring the Economy with Macroeconomic Indicators // // (4 weeks) // // Chapters Covered in Unit 3 // Krugman: Chapters 6, 7 Anderson: Problem Sets 8.1, 8.2, 8.4, 8.5, 8.6, 8.7 Morton: Activities: 9,10,11,12,13,14,15,16,17

// Concepts Covered: // Business Cycle, circular flow, GDP, inclusions and exclusions of GDP, three methods to calculating GDP, problem of double counting, nominal and real GDP, unemployment and what it means and measures, types of unemployment, full employment, natural rate of unemployment, price indexes, CPI, GDP deflator, inflation and its types and effects

// Unit 4: National Income, Price Determination and Fiscal Policy // // (5 weeks) // // Chapters Covered in Unit 4 // Krugman: Chapters 10, 11, 12, 17 Anderson: Activities 11.B Problem Sets: 11.3, 11.4, 11.5 Morton: Activities: 19,20,21,22,23,24,25,26,27,28,29,30,31,32,33

// Concepts Covered: // Classical economics vs Keynesian Economics, Case study: Great Depression (Classical and Keynesian answers), Aggregate Expenditures Model MPC, MPS, APC, APS, the simple multiplier and the multiplier effect, reasons for a negative sloping AD curve, determinants of AD, SRAS and LRAS, sticky prices and wages, determination of equilibrium output and price level, actual vs full employment, inflationary pressure and recessionary pressure, supply shocks and demand shocks, investment demand curve, expansionary fiscal policy, contractionary fiscal policy, discretionary fiscal policy, automatic stabilizers

// Unit 5: The Financial Sector (4 weeks) // // Chapters Covered in Unit 5 // Krugman: Chapters 13, 14 Anderson: Problem Set 10.1 Morton: Activities: 34,35,36,37,38,39,40,41,42

// Concepts Covered: // Functions and characteristics of money, M1, M2, M3 and reasons for use, money demand, money market, Federal Reserve System (tools and structure), open market operations, loanable funds market, interest rates as price for money (real vs nominal), politics and the Fed. **[CR8]**

// Unit 6: Stabilization Policy in Action (5 weeks) // // Chapters Covered in Unit 6 // Krugman: Chapters 15, 16 Morton: Activities: 43,44,45,46,47,48

// Concepts Covered: // Fiscal policy reconciled with AD/AS model, Monetary policy reconciled with AD/AS model, combination of the policies and their effects, government deficits and debts, demand pull and cost push inflation, the inflation-unemployment relationship, expectations and its role in the economy.

// Unit 7: Long Run Growth and Productivity (2 weeks) // // Chapters Covered in Unit 7 // Krugman: Chapters 8 Movie: //Kingdom of Mocha//

// Concepts Covered: // What creates economic growth, production possibilities analysis, growth in AD/AS model, long and short-run analysis, labor and productivity, technology and its role in future growth and productivity. International case studies **[CR8]**

// Unit 8: International Economics (3 weeks) // // Chapters Covered in Unit 8 // Krugman: Chapters 18, 19 Anderson: Activities 12A, Problem Sets: 12.1, 12.2, 12.3, 12.4, 12.5 Morton: Activities: 49,50,51,52,53,54,55

// Concepts Covered: // US and its role in world trade, absolute and comparative advantage, balance of payments, foreign exchange markets, implications of foreign trade, free trade vs protectionism, fiscal and monetary policy and their effect on international capital flows, historical trade agreements and treaties