AP Macroeconomics Syllabus 2014-2015
Ardrey Kell High School
Dawn Patterson
AP Macroeconomics is a college level course, taught every other day for the entire school year. Students are
expected to take the AP Macroeconomics Exam at the end of the semester in May, and depending on the
institution students may be exempt from an entry level economics course in college. Students must pass the
exam to be eligible for college credit.
Macroeconomics is the study of economies as a whole using the subdivisions of an economy such as
government, business sectors and households. The course of study is broken into Modules. The topics discussed
are from the Course Description provided by the College Board. Each module guides students through basic
concepts of macroeconomics and lessons based on these topics correspond with the textbook.
Students will also use the Student Resource book, Strive for a Five to complete exercises that extend the lesson
and offer practical applications to the concepts learned in the course.
The AP Exam consists of a 70 minute multiple choice section and a 60 minute free- response section. Students
must use clear language when answering questions. Students must also tailor their response to the verb prompt
and answer accordingly. For example:
•
Show: use a diagram and label it properly.
•
Explain: show all the steps necessary to arrive at an answer.
•
Identify: give a specific answer i.e. a list, labeling a graph etc. No elaboration is necessary.
•
Calculate: use mathematical equations to answer a question.
Textbook:
Krugman’s Economics for AP*: Margaret Ray and David Anderson. Adapted from Economics, Second Edition
Teacher’s Resource Binder, partnered with textbook.
Student Workbook: Strive for a Five
Additional readings:
Wall Street Journal
Forbes
Imprimis articles et al.
Scoring
Components
SC 1
SC 2
SC 3
SC 4
SC 5
SC 6
SC 7
SC 8
Description
pages
The course provides instruction in basic economic concepts, such as
marginal analysis and opportunity costs.
The course provides instruction in measurement of economic performance,
national income and price level determination.
The course provides instruction in unemployment and inflation
The course provides instruction in the financial sector.
The course provides instruction in stabilization policies.
The course provides instruction in economic growth and productivity
The course provides instruction in open economy and international trade
and finance
The course promotes understanding of aggregate economic activity and the
critical evaluation of determinants of economic progress and economic
decisions made by policy makers.
2-3
1
3-5, 8
6-8
10-13
10-16
2-3, 17-18
2-3;
18-20
8-10
SC 9
The course teaches students how to generate charts and graphs to describe
economic concepts.
SC 10
The course teaches students how to interpret and analyze charts, graphs and
data to describe economic concepts.
See key
economic
concepts
and graphs
for each
section
See key
economic
concepts
and graphs
Section One: Basic Economic Concepts: Modules 1-4, Textbook Reading pp. 1-45
Basic Economic Concepts:
Module One: The Study of Economics
o Individual Choice
 Resources are Scarce
 Opportunity Cost
o Microeconomics vs. Macroeconomics
o Positive versus Normative Economics
 When and Why Economists Disagree
Module Two: Module Introduction to Macroeconomics
o Business Cycle
 Employment, Unemployment, and the Business Cycle
 Aggregate Output and the Business Cycle
 Inflation, Deflation, and Price Stability
o Economic Growth
o The Use of Models in Economics
Module Three: The Production Possibilities Curve Model
o Trade Offs
 Efficiency
 Opportunity Cost
 Economic Growth
Module Four: Comparative Advantage and Trade
o There are Gains from Trade
o Comparative Advantage and Gains from Trade
Workbook: Modules 1-4
List of Key Concepts and Graphs:
introduction to the language of economics, micro vs. macro, positive versus normative, economic
decision making, pitfalls of decision making, scarcity, opportunity costs, production possibilities,
absolute advantage, comparative advantage, specialization, introduction of key macroeconomic issues,
marginal analysis, Production Possibilities Curve (frontier)
List of Key Words or Terms:
2
Economics, individual choice, market economy, command economy, incentives, property rights,
marginal analysis, resources, land, labor, capital, entrepreneurship, scarce, opportunity cost,
microeconomics, macroeconomics, economic aggregates, positive economics, normative economics,
business cycle, depression, recessions, expansions, employment, labor force, unemployment rate, output,
aggregate output, inflation, deflation, price stability, economic growth, model, other things equal (ceteris
paribus) assumption, trade-off, gains from trade, specialization, comparative advantage, absolute
advantage.
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Rhino scarcity
Comparative versus Absolute Trade
Simulation Games/Activities:
Resource Scarcity Game
Create a Zoo
Business Cycle Analogies
Create an airplane
Flashcards for Section One
Timeline for Section One:
Day
Class Activity
Introduce Macroeconomics and expectations of the course
1
Module One: Scarcity, opportunity costs; scarcity game; rhino scarcity video analysis
2
Module Two: Introduce and draw Business Cycle, unemployment, models and theories labor force Business
3
Cycle analogies
Quiz on Module One and Two; Introduce Production Possibilities Curve
4
Module Three: Production Possibilities Curve, absolute advantages, practice graphing PPC
5
Module Four: Comparative Advantage and Trade; graphing PPC’s
6
Module Three and Four Quiz, Review all quiz answers
7
Section One Test
8
Section Two: Supply and Demand: Modules 5-8, Textbook reading pp. 47-100
Module Five: Introduction and Demand
 Supply and Demands: A Model of a Competitive Market
 The Demand Curve
 The Demand Schedule and the Demand Curve
o Understanding shifts of the Demand Curve
 Changes in the Prices of Related Goods
 Changes in Income
 Changes in Tastes
 Changes in Expectations
 Changes in the number of Consumer
Module Six: Supply and Equilibrium
 The Supply Curve
3
o The Supply Schedule and Supply Curve
o Understanding Shifts of the Supply Curve
 Changes in input prices
 Changes in the price of related goods and services
 Changes in technology
 Changes in expectations
 Changes in the number of producers
Module Seven: Changes in Equilibrium
 Changes in Supply and demand
 What Happens When the Demand Curve Shifts
 What Happens When the Supply Curve Shifts
 Simultaneous Shifts of Supply and Demand
Module Eight: Price Controls (Ceilings and Floors)
 Why Government Control Prices
 Price Ceilings
o Modeling of a Price Ceiling
o The Effects of a Price Ceiling
 Shortage
 Inefficient Allocation to Consumers
 Wasted Resources
 Inefficiency Low Quality
 Black Markets
o So Why are There Price Ceilings?

Price Floors
o Modeling a Price Floor
o The Effects of a Price Floor
 Surplus
 Inefficiently Low Quantity
 Inefficient Allocation of Sales Among Sellers
 Wasted Resources
 Inefficiently High Quality
 Illegal Activity
Workbook: Modules 5-8
List of Key Concepts and Graphs:
Demand schedule, determinants of demand, individual and market demand curves, supply schedule,
determinants of supply, market equilibrium, shifts in supply and demand with effects of equilibrium
price and quantity, Demand and Supply Curves Showing Equilibrium
Demand and Supply Curves Showing Shifts in Demand/Supply/Equilibrium
List of Key Words or Terms:
• Competitive market
• Supply and demand model
• Demand schedule
• Equilibrium price
• Market-clearing price
• Equilibrium quantity
4
• Quantity demanded
• Demand curve
• Law of demand
• Change in demand
• Movement along the demand curve
• Substitutes
• Complements
• Normal good
• Inferior good
• Individual demand curve
• Quantity supplied
• Supply schedule
• Supply curve
• Law of supply
• Change in supply
• Movement along the supply curve
• Input
• Individual supply curve
• Equilibrium
• Surplus
• Shortage
• Price controls
• Price ceiling
• Price floor
• Inefficient allocation to consumers
• Wasted resources
• Inefficiently low quality
• Black markets
• Minimum wage
• Inefficient allocation of sales among sellers
• Inefficiently high quality
• Quantity control or quota
• License
• Demand price
• Supply price
• Wedge
• Quota rent
• Deadweight loss
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Shifting Demand
Shifting Supply
Simulation Games/Activities:
Survey students to create a demand graph.
Use real life scenarios to apply demand and supply shifts.
Letter to NYC Mayor in whether rent control should be continued
Practice Impacts on Supply and Demand; shifters and moves along the curve.
Timeline for Section Two:
Day Class Activity
Introduce Demand and demand shifters; demand video; survey students to create a demand curve
1
Demand Quiz; introduce supply
2
Supply shifters and quiz on Supply and Demand
3
Equilibrium
4
Changes in Equilibrium and quiz on Equilibrium and its changes
5
Price Controls (Ceilings and Floors)
6
Review negative and positive impacts of Ceilings and Floors; Letter to NYC mayor on continuing rent
7
control
Quantity Controls; Practice overall shifters that impact supply, demand, equilibrium, quotas and price
8
controls; Quiz on Price and Quantity controls
Test on Section Two
9
5
Section Three: Measurement of Economic Performance: Modules 10-15, Textbook pp.101-156
Module Ten: The Circular Flow and Gross Domestic Product
 The National Accounts
 The Circular-Flow Model
o The Simple Circular Flow Model
o The Expanded Circular-Flow Model
 Gross Domestic Product
o Measuring GDP as the Value of Production of Final Goods and Services
o Measuring GDP as Spending on Domestically Produced Final Goods and Services
o Measuring GDP as Factor Income Earned from Firms in the Economy
 GDP: What’s in and What’s Out?
Module Eleven: Interpreting Real Gross Domestic Product
 What GDP Tells Us
 Real GDP: A Measure of Aggregate Output
o Calculating Real GDP
o What Real GDP Doesn’t Measure
Module Twelve: The Meaning and Calculation of Unemployment
 The Unemployment Rate
o Defining and Measuring Unemployment
o The Significance of the Unemployment Rate
o Growth and Unemployment
Module Thirteen: The Causes and Categories of Unemployment
 The Natural Rate of Unemployment
o Job Creation and Job Destruction
o Frictional Unemployment
o Structural Unemployment
 Minimum Wages
 Unions
 Efficiency Wages
 Side Effects of Public Policy
o The Natural Rate of Unemployment
o Changes in the Natural Rate of Unemployment
 Changes in Labor Force Characteristics
 Changes in Labor Market Institutions
 Changes in Government Policies
Module Fourteen: Inflation: An Overview
 Inflation and Deflation
o The Level of Prices Doesn’t Matter…
o But the Rate of Change of Prices Does
 Shoe-Leather Costs
 Menu Costs
 Unit-of-Account Costs
o Winners and Losers from Inflation
o Disinflation
6
Module Fifteen: The Measurement and Calculation of Inflation
 Price Indices and the Aggregate Price Level
o Market Baskets and Price Indices
o The Consumer Price Index
o Other Price Measures
Workbook: Modules 10-15
List of Key Concepts and Graphs:
Circular flow model, GDP: real and nominal, how to calculate GDP and what is included/no included,
Unemployment: calculating and categorizing, measuring inflation using indices.
List of Key Words or Terms:
• National income and product accounts
• National accounts
• Household
• Firm
• Product markets
• Factor markets
• Consumer spending
• Stock
• Bond
• Government transfers
• Disposable income
• Private savings
• Financial markets
• Government borrowing
• Government purchases of goods and services
• Exports
• Imports
• Inventories
• Investment spending
• Final goods and services
• Intermediate goods and services
• Gross domestic product (GDP)
• Aggregate spending
• Value added
• Net exports
• Aggregate output
• Real GDP
• Nominal GDP
• Chain-linking
• GDP per capita
• Employed
• Unemployed
• Labor force
• Labor force participation rate
• Unemployment rate
• Discouraged workers
• Marginally attached workers
• Underemployed
• Job search
• Frictional unemployment
• Structural unemployment
• Efficiency wages
• Natural rate of unemployment
• Cyclical unemployment
• Real wage
• Real income
• Inflation rate
• Shoe-leather costs
• Menu costs
• Unit-of-account costs
• Nominal interest rate
• Real interest rate
• Disinflation
• Aggregate price level
• Market basket
• Price index
• Consumer price index (CPI)
• Producer price index (PPI)
• GDP deflator
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
7
Videos:
Khan Academy
Simulation Games/Activities:
Illustrate Circular Flow Model
Practice GDP examples
Student survey
Practice categorizing unemployment
Practice determining net cost and winners/losers with inflation and interest rates
CPI and inflation calculations
Timeline for Section Three:
Day Class Activity
Circular flow Model-simple and expanded; illustrate circular flow model; GDP-how to calculate and
1
what is included/not included; practice deciphering if an example is included or not
Circular Flow and GDP Quiz, Real versus Nominal GDP; sample calculations for each
2
Unemployment Rate and Definition; Labor Force Participation; survey students to see what categories
3
they fall into and use data for calculation practice
Unemployment causes and categories; practice categorizing; quiz on unemployment
4
Inflation, nominal and real interest rate, net cost to the economy, practice determining net
5
costs/winners and losers with inflation and interest rates
Quiz on Unemployment and Net costs to economy/inflation;
6
Price Indices, Market basket of goods; compute inflation and apply to CPI
7
Test on Section Three
8
Section Four: National Income and Price Determination: Modules 16-20, Textbook pp. 157-219
Module Sixteen: Income and Expenditure
 The Multiplier
o Marginal Propensity to Consume
o Spending Multiplier
 Consumer Spending
o Current Disposable Income and Consumer Spending
o Shifts of the Aggregate Consumption Function
 Changes in Expected Future Disposable Income
 Changes in Aggregate Wealth
 Investment Spending
o The Interest Rate and Investment Spending
o Expected Future Real GDP, Production Capacity, and Investment Spending
Module Seventeen: Aggregate Demand: Introduction and Determinants
 Aggregate Demand
o Why Is the Aggregate Demand Curve Downward Sloping?
 Wealth Effect
 Interest Rate Effect
o Shifts of the Aggregate Demand Curve
 Changes in Expectations
8
 Changes in Wealth
 Size of the Existing Stock of Physical Capital
o Government Policies and Aggregate Demand
 Fiscal Policy
 Monetary Policy
Module Eighteen: Aggregate Supply: Introduction and Determinants
 Aggregate Supply
o The Short-Run Aggregate Supply Curve
o Shifts of the Short-Run Aggregate Supply Curve
 Changes in Commodity Prices
 Changes in Nominal Wages
 Changes in Productivity
o The Long-Run Aggregate Supply Curve
o From the Short Run to the Long Run
Module Nineteen: Equilibrium in the Aggregate Demand-Aggregate Supply Model
 The AD–AS Model
o Short-Run Macroeconomic Equilibrium
o Shifts of Aggregate Demand: Short-Run Effects
o Shifts of the SRAS Curve
o Long-Run Macroeconomic Equilibrium
Module Twenty: Economic Policy and the Aggregate Demand-Aggregate Supply Model
 Macroeconomic Policy
o Policy in the Face of Demand Shocks
o Responding to Supply Shocks
 Fiscal Policy: The Basics
o Taxes, Purchases of Goods and Services, Government Transfers, and Borrowing
o The Government Budget and Total Spending
o Expansionary and Contractionary Fiscal Policy
o A Cautionary Note: Lags in Fiscal Policy
Module Twenty One: Fiscal Policy and the Multiplier
 Multiplier Effects of an Increase in Government Purchases of Goods and Services
 Multiplier Effects of Changes in Government Transfers and Taxes
 How Taxes Affect the Multiplier
Workbook: Modules 16-21
List of Key Concepts and Graphs:
Long run aggregate supply, short run aggregate supply, aggregate demand, shifters, slopes of graphs,
equilibrium, difference between short and long run equilibrium, AD-AS Model, demand and supply
shocks, recessionary or inflationary gap, output gaps, rationale behind stabilization, expansionary and
contractionary fiscal policies, how multiplier effect is influenced and why fiscal policy uses them.
List of Key Words or Terms:
• Marginal propensity to consume (MPC)
• Marginal propensity to save (MPS)
• Long-run aggregate supply curve
• Potential output
9
• Autonomous change in aggregate spending
• Multiplier
• Consumption function
• Autonomous consumer spending
• Aggregate consumption function
• Planned investment spending
• Inventories
• Inventory investment
• Unplanned inventory investment
• Actual investment spending
• Aggregate demand curve
• Wealth effect of a change in the aggregate price level
• Interest rate effect of a change in the aggregate price level
• Fiscal policy
• Monetary policy
• Aggregate supply curve
• Nominal wage
• Sticky wages
• Short-run aggregate supply curve
• AD–AS model
• Short-run macroeconomic equilibrium
• Short-run equilibrium aggregate price level
• Short-run equilibrium aggregate output
• Demand shock
• Supply shock
• Stagflation
• Long-run macroeconomic equilibrium
• Recessionary gap
• Inflationary gap
• Output gap
• Self-correcting
• Stabilization policy
• Social insurance
• Expansionary fiscal policy
• Contractionary fiscal policy
• Lump-sum taxes
• Automatic stabilizers
• Discretionary fiscal policy
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
MPC from Khan Academy
Simulation Games/Activities:
Paper Clip simulation to demonstrate multiplier and MPC/MPS
Practice Aggregate shifters
Released exam questions
Timeline for Section Four:
Day Class Activity
The multiplier, MPC and MPS, paper clip simulation
1
Aggregate demand; shifters, practice problems shifting
2
Aggregate Supply; SRAS, shifters and practice problems
3
Aggregate Supply; LRAS; Quiz on Aggregate Demand and Supply
4
Equilibrium and shifting graphs, practice scenarios
5
Economic Policy and AD/AS Model, practice released question on Model
6
Fiscal Policy and multiplier, automatic stabilizers, practice problems with both multipliers
7
Test on Section Four
8
Section Five: Financial Sector: Modules 22-29, Textbook pp. 221-293
Module Twenty-Two: Saving, Investment, and the Financial System
 Matching Up Savings and Investment Spending
o The Savings– Investment Spending Identity
 The Financial System
o Three Tasks of a Financial System
10
 Reducing Transaction Costs
 Reducing Risk
 Providing Liquidity
o Types of Financial Assets
 Loans
 Bonds
 Loan-backed Securities
 Stocks
o Financial Intermediaries
 Mutual Funds
 Pension Funds and Life Insurance Companies
 Banks
Module Twenty-Three: The Definition and Measurement of Money
 The Meaning of Money
o What Is Money?
o Roles of Money
 Medium of Exchange
 Store of Value
 Unit of Account
o Types of Money
o Measuring the Money
Module Twenty-Four: The Time Value of Money
 The Concept of Present Value
o Borrowing, Lending, and Interest
o Defining Present Value
o Using Present Value
Module Twenty-Five: Banking and Money Creation
 The Monetary Role of Banks
o What Banks Do
o The Problem of Bank Runs
o Bank Regulation
 Deposit Insurance
 Capital Requirements
 Reserve Requirements
 The Discount Window
 Determining the Money Supply
o How Banks Create Money
o Reserves, Bank Deposits, and the Money Multiplier
o The Money Multiplier in Reality
Module Twenty-Six: The Federal Reserve System: History and Structure
 The Federal Reserve System
 An Overview of the Twenty-First Century American Banking System
o Crisis in American Banking at the Turn of the Twentieth Century
o Responding to Banking Crises: The Creation of the Federal Reserve
o The Structure of the Fed
11
o The Effectiveness of the Federal Reserve System
o The Savings and Loan Crisis of the 1980s
o Back to the Future: The Financial Crisis of 2008
 Long-Term Capital (Mis)Management
 Subprime Lending and the Housing Bubble
 Crisis and Response
Module Twenty-Seven: The Federal Reserve: Monetary Policy
 The Federal Reserve System
o The Functions of the Federal Reserve System
 Financial Services
 Supervise and Regulate Banking Institutions
 Maintain Stability of the Financial System
 Conduct Monetary Policy
 What the Fed Does
o The Reserve Requirement
o The Discount Rate
o Open-Market Operations
Module Twenty-Eight: The Money Market
 The Demand for Money
o The Opportunity Cost of Holding Money
o The Money Demand Curve
o Shifts of the Money Demand Curve
 Changes in the Aggregate Price Level
 Changes in Real GDP
 Changes in Technology
 Changes in Institutions
 Money and Interest Rates
o The Equilibrium Interest Rate
o Two Models of the Interest Rate
Module Twenty-Nine: The Market for Loanable Funds
 The Market for Loanable Funds
o The Equilibrium Interest Rate
o Shifts of the Demand for Loanable Funds
o Shifts of the Supply of Loanable Funds
o Inflation and Interest Rates
 Reconciling the Two Interest Rate Models
o The Interest Rate in the Short Run
o The Interest Rate in the Long Run
Workbook: Modules 22-29
List of Key Concepts and Graphs:
Relationship between saving and investing, purpose of stocks, bonds, loans, bank
deposits, and real estate, diversification with financial intermediaries, function, role, and forms of
money, how money in economy is measured
12
List of Key Words or Terms:
• Interest rate
• Savings–investment spending identity
• Budget surplus
• Budget deficit
• Budget balance
• National savings
• Capital inflow
• Wealth
• Financial asset
• Physical asset
• Liability
• Transaction costs
• Financial risk
• Diversification
• Liquid
• Illiquid
• Loan
• Default
• Loan-backed securities
• Financial intermediary
• Mutual fund
• Pension fund
• Life insurance company
• Bank deposit
• Bank
• Money
• Currency in circulation
• Checkable bank deposits
• Money supply
• Medium of exchange
• Store of value
• Unit of account
• Commodity money
• Commodity-backed money
• Fiat money
• Monetary aggregate
• Near-moneys
• Present value
• Net present value
• Bank reserves
• T-account
• Reserve ratio
• Required reserve ratio
• Bank run
• Deposit insurance
• Reserve requirements
• Discount window
• Excess reserves
• Monetary base
• Money multiplier
• Central bank
• Commercial bank
• Investment bank
• Savings and loan (thrift)
• Leverage
• Balance sheet effect
• Vicious cycle of deleveraging
• Subprime lending
• Securitization
• Federal funds market
• Federal funds rate
• Discount rate
• Open-market operation
• Short-term interest rates
• Long-term interest rates
• Money demand curve
• Liquidity preference model of the interest rate
• Money supply curve
• Loanable funds market
• Rate of return
• Crowding out
• Fisher effect
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Khan Academy
Simulation Games/Activities:
Defining our money
Has the American Dream Disappeared? Reading and questions
Should you go to college or get a job?
Practice real life problems with budgeting and employment
13
Banks creating money simulation
Scene from “It’s a Wonderful Life”
Flashcard review
Budget exercise
Scenarios affecting loanable funds graph
Timeline for Section Five:
Day Class Activity
Financial System, Savings and Investment Spending, practice with matching up savings and
1
investment spending, has the American Dream Disappeared?
The meaning of money, roles, measuring, and types, defining our money
2
Present versus future value, practice calculations
3
Monetary roles of banks and how the Federal Reserve determines the money supply, M1, M2, should
4
you go to college? Practice problems, banks creating money simulation
Overview of the Federal Reserve, news on the new head of the Fed, , Scene from “It’s a Wonderful
5
Life”
Functions of the Federal Reserve, flashcard review
6
Demand for money, interest rates, budget exercise
7
Loanable Funds, Two interest rate models, scenarios affecting loanable funds-graphed
8
Practice with loanable funds; review of section
9
10
Section Five Test
Section Six: Inflation, Unemployment, Stabilization Policies: Modules 30-36, Textbook pp. 295-366
Module Thirty: Long-run Implications of Fiscal Policy: Deficits and the Public Debt
 The Budget Balance
 The Budget Balance as a Measure of Fiscal Policy
o The Business Cycle and the Cyclically Adjusted Budget Balance
o Should the Budget Be Balanced?
 Long-Run Implications of Fiscal Policy
o Deficits, Surpluses, and Debt
o Problems Posed by Rising Government Debt
o Deficits and Debt in Practice
o Implicit Liabilities
Module Thirty-One: Monetary Policy and the Interest Rate
 Monetary Policy and the Interest Rate
 Monetary Policy and Aggregate Demand
o Expansionary and Contractionary Monetary Policy
 Monetary Policy in Practice
o Inflation Targeting
Module Thirty-Two: Money, Output, and the Prices in the Long Run
 Money, Output, and Prices
o Short-Run and Long-Run Effects of an Increase in the Money Supply
o Money Neutrality
o Changes in the Money Supply and the Interest Rate in the Long Run
14
Module Thirty-Three: Types of Inflation, Disinflation, and Deflation
 Money and Inflation
o The Classical Model of Money and Prices
o The Inflation Tax
o The Logic of Hyperinflation
 Moderate Inflation and Disinflation
o The Output Gap and the Unemployment Rate
Module Thirty-Four: Inflation and Unemployment: The Phillips Curve
 Introduction to the Phillips Curve
o The Short-Run Phillips Curve
o Inflation Expectations and the Short-Run Phillips Curve
 Inflation and Unemployment in the Long Run
o The Long-Run Phillips Curve
o The Natural Rate of Unemployment, Revisited
o The Costs of Disinflation
 Deflation
o Debt Deflation
o Effects of Expected Deflation
Module Thirty-Five: History and the Alternative Views of Macroeconomics
 Classical Macroeconomics
o Money and the Price Level
o The Business Cycle
 The Great Depression and the Keynesian Revolution
o Keynes’ Theory
o Policy to Fight Recessions
 Challenges to Keynesian Economics
o The Revival of Monetary Policy
o Monetarism
o Inflation and the Natural Rate of Unemployment
o The Political Business Cycle
 Rational Expectations, Real Business Cycles, and New Classical Macroeconomics
o Rational Expectations
o Real Business Cycles
Module Thirty-Six: The Modern Macroeconomics Consensus
 The Modern Consensus
o Is Expansionary Monetary Policy Helpful in Fighting Recessions?
o Is Expansionary Fiscal Policy Effective in Fighting Recessions?
o Can Monetary and/or Fiscal Policy Reduce Unemployment in the Long Run?
o Should Fiscal Policy Be Used in a Discretionary Way?
o Should Monetary Policy Be Used in a Discretionary Way?
 Central Bank Targets
 Asset Prices
 Unconventional Monetary Policies
o The Clean Little Secret of Macroeconomics
15
Workbook: Modules 30-36
List of Key Concepts and Graphs:
Budget balance equations, budget surplus and deficit, stabilizers affecting budget, government debt, debt
versus GDP, hyperinflation, inflation tax with printed money, cost-push inflation, shifts in SRAS and
Price level, demand pull inflation caused by rightward shift of AD, aggregate output equals potential
output, natural rate of unemployment occurs, inflationary gap leads to below natural rate of
unemployment and vice versa, money neutrality and expansionary policy, contractionary policy and
inflation, their AS-AD affects, money neutrality predictions, interest rates and the Fed and how this
affects AD, Phillips curve, no long run trade-off between inflation and unemployment, limits of
expansionary policies, difficulty reducing inflation, why deflation is a problem for policy, why Great
Depression and classical macroeconomics did not work, macroeconomic policy activism, monetarism
and the limits of discretionary monetary policy, Keynesian ideas led to new classical macroeconomics,
gaps in economic debate
List of Key Words or Terms:
• Cyclically adjusted budget balance
• Fiscal year
• Public debt
• Debt–GDP ratio
• Implicit liabilities
• Target federal funds rate
• Expansionary monetary policy
• Contractionary monetary policy
• Taylor rule for monetary policy
• Inflation targeting
• Monetary neutrality
• Classical model of the price level
• Inflation tax
• Cost-push inflation
• Demand-pull inflation
• Short-run Phillips curve
• Nonaccelerating inflation rate of unemployment (NAIRU)
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Khan Academy
Simulation Games/Activities:
Debt clocks
Calculating Budgets
Practice Problems on Monetary Policy
Spiral of hyperinflation activity
SRPC practice scenarios
Comparing schools of thought
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• Long-run Phillips curve
• Debt deflation
• Zero bound
• Liquidity trap
• Macroeconomic policy
activism
• Monetarism
• Discretionary monetary
policy
• Monetary policy rule
• Quantity Theory of Money
• Velocity of money
• Natural rate hypothesis
• Political business cycle
• New classical
macroeconomics
• Rational expectations
• New Keynesian economics
• Real business cycle theory
Survey of students
Timeline for Section Six:
Day Class Activity
The Budget Balance, looking at debt clocks, calculating budget balance, private savings, investment
1
Monetary policy and interest rate, practice problems for monetary policy
2
Money, output, and prices, short and long-run impacts of monetary policy
3
Money and inflation, spiral of hyperinflation activity
4
Phillips Curve, practice scenarios impacting SRPC
5
Classical macroeconomics, comparing schools of thought for macroeconomics
6
General consensus, survey of students
7
Section Six Test
8
Section Seven: Economic Growth and Productivity: Modules 37- 40, Textbook pp. 367-406
Module Thirty-Seven: Long-Run Economic Growth
 Comparing Economies Across Time and Space
o Real GDP per Capita
o Growth Rates
 The Sources of Long-Run Growth
o The Crucial Importance of Productivity
o Explaining Growth in Productivity
 Physical Capital
 Human Capital
Technology
Module Thirty-Eight: Productivity and Growth
 Productivity and Growth
o Accounting for Growth: The Aggregate Production Function
o What About Natural Resources?
 Success, Disappointment, and Failure
o East Asia’s Miracle
o Latin America’s Disappointment
o Africa’s Troubles
Module Thirty-Nine: Growth Policy: Why Economic Growth Rates Differ
 Rates Differ
o Capital, Technology, and Growth Differences
 Adding to Physical Capital
 Adding to Human Capital
 Technological Progress
o The Role of Government in Promoting Economic Growth
 Governments and Physical Capital
 Governments and Human Capital
 Governments and Technology
 Political Stability, Property Rights, and Excessive Government Intervention
 Is World Growth Sustainable?
o Natural Resources and Growth, Revisited
o Economic Growth and the Environment
17
Module Forty: Economic Growth in Macroeconomic Models
 Long-run Economic Growth and the Production Possibilities Curve
 Long-run Economic Growth and the Aggregate Demand and Supply Model
 Distinguishing Between Long-run Growth and Short-run Fluctuations
Workbook: Modules 37-40
List of Key Concepts and Graphs:
Real GDP per capita, economic growth, revisiting PPC, “rule of 70,” average labor productivity, labor
productivity and enhancing this, aggregate production function, convergence hypothesis and
economically advanced countries, how to achieve long-term economic growth, power of incentives to
change human behavior, negative externalities can be fixed with economic incentives, economic growth
and the PPC/LRAS, investment into certain areas leads to faster PPC shift, fluctuations in business cycle
and PPC and shifts in AD or SRAS curves
List of Key Words or Terms:
• Rule of 70
• Labor productivity (productivity)
• Physical capital
• Human capital
• Technology
• Aggregate production function
• Diminishing returns to physical capital
• Growth accounting
• Total factor productivity
• Convergence hypothesis
• research and development (R & D)
• Infrastructure
• Sustainable
• Depreciation
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Khan Academy
PBS News hour
Simulation Games/Activities:
Find the production activity
Human Development Index research
Discussion of human capital and LRAS with long-term growth
Timeline for Section Seven:
Day Class Activity
Long-run economic growth, find the production activity
1
Productivity and growth, PBS News hour video
2
Growth policy: why economic growth rates differ, Human Development Index research
3
Economic growth in macroeconomic models, discussion of human capital and LRAS and long-term
4
growth
Section Seven Test
5
18
Section Eight: The Open Economy: International Trade and Finance: Modules 41- 45, Textbook pp. 409453
Module Forty-One: Capital Flows and the Balance of Payments
 Capital Flows and the Balance of Payments
o Balance of Payments Accounts
o Modeling the Financial Account
o Underlying Determinants of International Capital Flows
o Two-way Capital Flows
Module Forty-Two: The Foreign Exchange Market
 The Role of the Exchange Rate
o Understanding Exchange Rates
o The Equilibrium Exchange Rate
o Inflation and Real Exchange Rates
o Purchasing Power Parity
Module Forty-Three: Exchange Rate Policy
 Exchange Rate Policy
o Exchange Rate Regimes
o How Can an Exchange Rate Be Held Fixed?
o The Exchange Rate Regime Dilemma
Module Forty-Four: Exchange Rates and Macroeconomic Policy
 Exchange Rates and Macroeconomic Policy
o Devaluation and Revaluation of Fixed Exchange Rates
o Monetary Policy under a Floating Exchange Rate Regime
o International Business Cycle
Module Forty-Five: Putting It All Together
 Tackling the Free Response Questions
Workbook: Modules Forty-One to Forty-Five
List of Key Concepts and Graphs:
Balance of payments accounts, transactions and liabilities, current and financial account must sum to
zero, CA=-FA, flow of financial capital based off interest rates, exchange of foreign currencies,
exchange rate and strength, weakness of the dollar compare to the euro, movements in exchange rate,
real versus nominal exchange rate, government policy and exchange rate, fixed rates and market
equilibrium, target exchange rate, advantages and disadvantages to fixed exchange rate regime versus
floating exchange rate policy, devalue currency and the effects, revalue currency and the effects,
floating exchange rate and impacts.
List of Key Words or Terms:
Balance of payments accounts
• Balance of payments on the current account (the current account)
• Balance of payments on goods and services
• Merchandise trade balance (trade balance)
• Balance of payments on the financial account (the financial account)
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• Real exchange rate
• Purchasing power parity
• Exchange rate regime
• Fixed exchange rate
• Floating exchange rate
• Foreign exchange market
• Exchange rates
• Appreciates
• Depreciates
• Equilibrium exchange rate
• Exchange market intervention
• Foreign exchange reserves
• Foreign exchange controls
• Devaluation
• Revaluation
Web Resources:
www.reffonomics.com
http://courses.bfwpub.com/youreconportal/
Videos:
Khan Academy
Simulation Games/Activities:
Balance of payments practice problems
Simulation with currency
Practice AP Problems with foreign exchange markets
Worksheet on connections between monetary policy and foreign exchange rates
Timeline for Section Eight:
Day Class Activity
Capital flows and the balance of payments, balance of payments practice problems
1
Foreign exchange market, simulation with currency
2
Exchange Rate Policy, Practice AP Problems
3
Exchange rate policy and macroeconomics, worksheet on connections between monetary policy and
4
foreign exchange rates
Tackling the free-response questions
5
Practice AP Problems
6
Section Eight Test
7
Remaining Time will be left for review
8
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