BWHS Advanced Placement Economics 2014- 2015
Instructor: Steve Celio (steve.celio@lcps.org)
Resources
 Textbook: McConnell, C. and Brue, S. (2009). Economics, 18th Edition, New York: McGraw-Hill.
 Textbook supplement: Ellison, L. (2009). AP Achiever: Advanced Placement exam prep guide for
microeconomics and macroeconomic. New York: McGraw-Hill.
 Outside reading, Semester 1: Hazlitt, Henry (1988 reprint). Economics in One Lesson.
 Outside reading, Semester 2: Wheelan, Charles (2002).Naked economics. New York: Norton.
Course Overview and Objectives:
Economics is about how we, as a society, allocate scarce resources. Who gets what? How much? When? At
what price? Who makes it? These are all questions that economists answer. In this class, you will be taking
TWO college courses and preparing for TWO AP exams. Our first goals are to become economically literate,
and to learn how to improve decision making through economic thinking. By working to meet those goals, you
will be well prepared for both exams.
Advanced Placement Economics is a full year course. We will run on a college semester schedule, i.e.
Microeconomics will be covered from September-December, and Macroeconomics from January through April,
with May reserved for Exam Review. The full course outline is available through Mr. Celio’s CMS page and
Vision course.
Microeconomics. The central goal in this course is to help students gain an understanding of and
appreciation for the principles of economics that affect how individuals, households and businesses
make economic decisions. Students will learn how to generate charts and graphs to describe economic
concepts. Exam date: May 15, 2015, 8:00 AM.
Macroeconomics. The central goal in this course is to help students gain an understanding of and
appreciation for the principles of economics that apply to the American economic system as a whole.
Students will study the nature and functions of product markets and particular emphasis will be placed
on national income, fiscal and monetary policy, economic performance measures, economic growth and
open economies. Exam date: May 14, 2015, 12:00.
Course Resources and Requirements:
You must sign up for BWHS AP Economics on Loudoun Vision. This is required as it is the preferred means of
communication, and some resources and assignments will be made available primarily through this site. You
will also need to have a TurnItIn.com account and should sign up for “Remind” (Formerly Remind 101).
Directions and passwords for all of these will be provided in class.
You will need a three-ring binder to organize course materials. The front page will be the table of contents. All
work will be logged on this this in the order that it is given, and points possible and points earned should be
added as well. The actual assignments will be numbered and placed in the correct order behind the table of
contents. This will be collected and reviewed for a grade near the end of the quarter, but the main purpose of
the assignment is to enhance your organization and aid your success in this course.
Quarterly schedules will be provided for you and available through Mr. Celio’s CMS and Vision pages. There
is no reason that students should ever be unaware of assignments being due. The Remind system will be
utilized as well in the case of major assignments and changes.
Grading:
Category
% of Brief description
grade
Daily “frames”
0 Writing/graphing exercises to reinforce key concepts and identify areas where
clarification or re-teaching may be necessary
Classroom activities
10 Worksheets, free responses, etc., done individually or in pairs. Sometimes
graded on performance, sometimes on completion. Students may be assigned
to complete these as homework.
Chapter quizzes
20 Generally 10 questions on each chapter, includes reading and vocab questions
Problem sets
15 One per unit, serves as concept reinforcement and test review
Unit Tests
35 Cover between 3-5 chapters 60 MC questions, 1-2 FRQs
Projects
15 One per quarter, based on books or articles
Notebook
5 Graded on completion, for organizational purposes
Classroom Expectations and Policies:
1. Be on time, be prepared, and be polite.
2. All school rules (e.g. Honor Code, tardy policy, phone/iPod rules, etc.) will be enforced in class.
3. Economics class is the time for economics work, students should remain focused and on-task.
4. Keep up with your reading and outline your chapters. There are also many practice options on-line and
in the review book to reinforce your learning.
5. Do your homework! You are also expected to complete any work that we do not finish during class.
6. If you do not understand something ASK QUESTIONS. We need to correct misunderstandings as they
arise. Correct mistakes in your assignments.
7. All work is due at the beginning of class on the day identified on the quarterly schedules. These dates
will only change in the case of extenuating circumstances such as snow days.
8. Students who miss class are expected to turn in any assignments that were due as soon as they return to
class. Turning it in at this time is the student’s responsibility, if they fail to do so it will be treated as late
work.
9. Late work policy:
 For tests/quizzes missed for excused absences/tardiness, the student is responsible for scheduling a
make-up time to be completed within one week of their return to class. Failure to do so will result in a
grade of 50% being assigned. Missed test or quizzes for unexcused absences or tardiness will result in a
grade of 50% being assigned.
 The notebooks and projects will be due on the dates identified on the calendar, and will be assessed a
25-point penalty for each day they are late.
 In-class activities and homework assignments, including problem sets, will not be accepted late except
in the cases of excused absences. A grade of 20% will be given for missed homework assignments.
10. Students should monitor their grades via Clarity, and notify Mr. Celio of any discrepancies via email (to
allow him to have a record of the issue) as soon as they become aware of it.
11. Due to the timing and structure of the course, all students, including seniors, will take the mid-term and
final exam. Seniors who meet the LCPS Exam Exemption criteria will have the option of not counting
their exam, or counting it if it improves their final grade.
Acknowledgement of Class Policies for AP Economics
Classroom Expectations and Policies:
1. Be on time, be prepared, and be polite.
2. All school rules (e.g. Honor Code, tardy policy, phone/iPod rules, etc.) will be enforced in class.
3. Economics class is the time for economics work, students should remain focused and on-task
4. Keep up with the reading and outline your chapters. There are also many practice options on-line and in
the review book to reinforce your learning.
5. Do your homework! You are also expected to complete any work that we do not finish during class.
6. If you do not understand something ASK QUESTIONS. We need to correct misunderstanings as they
arise. Correct mistakes in your assignments.
7. All work is due at the beginning of class on the day identified on the quarterly schedules. These dates
will only change in the case of extenuating circumstances such as snow days.
8. Students who miss class are expected to turn in any assignments that were due as soon as they return to
class. Turning it in at this time is the student’s responsibility, if they fail to do so it will be treated as late
work.
9. Late work policy:
 For tests/quizzes missed for excused absences/tardiness, the student is responsible for scheduling a
make-up time to be completed within one week of their return to class. Failure to do so will result in a
grade of 50% being assigned. Missed test or quizzes for unexcused absences or tardiness will result in a
grade of 50% being assigned.
 The notebooks and projects will be due on the dates identified on the calendar, and will be assessed a
25-point penalty for each day they are late.
 In-class activities and homework assignments, incuding problem sets, will not be accepted late except in
the cases of excused absences. A grade of 20% will be given for missed homework assignments.
10. Students should monitor their grades via Clarity, and notify Mr. Celio of any discrepancies via email (to
allow him to have a record of the issue) as soon as they become aware of it.
11. Due to the timing and structure of the course, all students, including seniors, will take the mid-term and
final exam. Seniors who meet the LCPS Exam Exemption criteria will have the option of not counting
their exam, or counting it if it improves their final grade.
I understand the aforementioned expectations and policies for AP Economics, and will abide by them.
______________________________________________
Name
__________________
Date
______________________________________________
Signature
___________________
Phone # (optional)
Key vocab terms: (these are the most significant terms in each chapter, but this is not a comprehensive
list of what you need to know)
Chapter 1: Economics, utility, marginal utility, scarcity, opportunity cost, production possibilities curve,
capital goods, consumer goods, economic growth, factors of production (identify), comparative advantage
Chapter 2: Money, barter, command economy, market economy, competition, invisible hand, dollar votes
Chapter 4: Durable v. non-durable goods, monopoly, externality, public good, free-rider problem, transfer
payment, externality, marginal tax rates, excise tax
Chapter 3: Demand, law of demand, diminishing marginal utility, income effect, substitution effect, inferior
goods, normal goods, substitute good, complementary goods, supply, determinants of supply, equilibrium
price/quantity, surplus, shortage, productive efficiency, allocative efficiency
Chapter 6: Price elasticity of demand, unit elasticity, elastic demand, inelastic demand, perfectly elastic
demand, perfectly inelastic demand, total revenue test, price elasticity of supply, market period, short run,
long run, cross-elasticity of demand, income elasticity of demand, consumer surplus, producer surplus,
efficiency loss
Chapter 7: Utility, law of diminishing marginal utility, total utility, marginal utility, rational behavior,
budget constraints, consumer equilibrium, income effect, substitution effect
Chapter 8: Opportunity cost, explicit costs, implicit costs, normal profit, economic profit, total product,
marginal product, average product, law of diminishing returns, fixed costs, variable cost, total cost, marginal
costs, economies of scale, returns to scale, minimum efficient scale, natural monopoly
Chapter 9: Pure competition, imperfect competition, price taker, average revenue, total revenue, marginal
revenue, break- even point, MR=MC rule, short-run supply curve, constant-cost industry, increasing cost
industry, [productive efficiency, allocative efficiency, consumer surplus, producer surplus in context]
Chapter 10: Pure monopoly, barriers to entry, simultaneous consumption, network effects, X-inefficiency,
price discrimination, socially optimal price, fair-return price
Chapter 11: Monopolistic competition, product differentiation, non-price competition, Four-firm
concentration ratio, Excess capacity, oligopoly, Mutual interdependence, game theory, collusion, price war,
cartel
Chapter 12: Derived demand, marginal product, marginal revenue product, marginal resource cost,
MRP=MRC rule, elasticity of resource demand, least-cost combination of resources, profit-maximizing
combination of resources
Chapter 13: Wage rate, nominal wage, real wage, purely competitive labor market, monopsony, minimum
wage, wage differentials, human capital
Chapter 14: Economic rent, incentive function, time-value of money, nominal interest rate, real interest rate,
Explicit costs, implicit costs, economic profit, normal profit
Chapter 16: Private goods, public goods, free-rider program, cost-benefit analysis, externalities, Coase
Theorem, asymmetric information, moral hazard problem, adverse selection problem
Chapter 17: Public Choice Theory, logrolling, special-interest effect, benefits received principle, ability to
pay principle, progressive tax, regressive tax, proportional tax, efficiency loss of a tax
Chapter 20: Lorenzo Curve, Gini ratio, equality efficiency trade off
Chapter 23: The business cycle; recession; real gross domestic product (GDP); nominal GDP;
unemployment, financial investment, economic investment, demand shocks, supply shocks, sticky prices,
inflation.
Chapter 24: National income accounting; value added; expenditures approach (know parts- C, I, G & X);
income approach (know parts), national income; personal income; disposable income; price index
Chapter 25: Economic growth; real GDP per capita; labor productivity; infrastructure; human capital
Chapter 26: Peak; trough; expansion, labor force; unemployment rate; three types (frictional, structural and
cyclical) of unemployment, full rate of unemployment, natural rate of unemployment, Okun’s law;
Consumer Price Index (CPI); Demand-pull v. cost-push inflation; deflation; nominal income, real income,
cost-of-living adjustments, hyperinflation
Chapter 27: Consumption schedule, saving schedule, break even income, Average propensity to consume
(save), Marginal propensity to consume (save), Wealth effect, Expected rate of return, Multiplier
Chapter 28: Planned investment, Investment schedule, Aggregate expenditures schedule, Equilibrium GDP,
leakage, injection, net exports, recessionary expenditure gap, inflationary expenditure gap
Chapter 29: Aggregate demand-aggregate supply (AD-AS) model, Aggregate demand, Interest rate effect,
Determinants of aggregate demand, Aggregate supply, Short-run aggregate supply curve, Determinants of
aggregate supply, Productivity, Equilibrium price level, Equilibrium real output
Chapter 30: Fiscal policy, Budget deficit/surplus, built-in (automatic) stabilizers, progressive tax system,
crowding out effect, public debt, US securities
Chapter 31: Liquidity, M1, M2, commercial banks, Federal Reserve System, Federal Open Market
Commission
Chapter 32: Fractional reserves banking system, balance sheet, required reserves, reserve ratios, Federal
funds rate, monetary multiplier
Chapter 33: Monetary policy, interest, transactions demand, asset demand, open market, discount rate,
Federal Funds Rate, prime interest rate, Taylor Rule
Chapter 35: Phillips Curve; Stagflation; Aggregate supply shocks; Long-run vertical Phillips Curve, Supplyside economics; LafferCurve
Chapter 37: Comparative advantage (again), Terms of trade; Trading possibilities line,, gains from
trade,world price, domestic price, export supply curve, tariffs (types), nontariff barrier, Dumping, World
Trade Organization (WTO)
Chapter 38: Balance of payments; Current account; Trade deficit; Trade surplus; Official reserves, Floating
exchange rate system; Fixed-exchange-rate system; Purchasing power parity theory; Currency intervention;
Exchange controls
Microeconomic Outline (1stSemester)
Unit 1: Basic Economic Concepts
(Chapters 1, 2, 4&5, McConnell & Brue)
A. Founding Principles
 Scarcity, the economizing problem
 Tradeoffs and Opportunity Cost
 Free-market system (Adam Smith’s invisible hand)
B. Types of Economics
 Microeconomics vs. macroeconomics
 Positive economics vs. normative economics
C. Production Possibilities Graph
 Straight vs. bowed PPF
 Underutilization, full employment, and unattainable
 Law of increasing opportunity cost
 3 shifters of the PPF
 Consumer goods vs. capital goods
D. Circular Flow Model
 Product market, Factor market, and Public/Private sector
E. Specialization and Trade
 Absolute advantage
 Comparative advantage
Unit 2: Supply, Demand, And Consumer Choice
(Chapters 3, 6, & 7. McConnell & Brue)
A. Demand (graph)
 Law of demand
 Market demand curve
 Determinants of demand
 Normal vs. inferior goods
 Substitutes and complements
B. Supply (graph)
 Law of supply
 Market supply curve
 Determinants of supply
C. Equilibrium and Efficiency (graph)
 Equilibrium price and quantity
 Disequilibrium: surplus and shortages (graphing)
D. Government Policies (graphs)
 Price floors and Price ceilings
 Excise taxes, Subsidies, Tariffs, Quotas
E. Elasticity
 Price, Income, and Cross Price elasticity of demand
 The total revenue test (graph)
F. Consumer Choice
 Law of diminishing marginal utility, Substitution effect, Income effect
 Marginal benefit/cost
 Utility maximizing rule
Unit 3 Costs of Production and Perfect Competition
(Chapters 8&9.McConnell & Brue.)
A. Economists vs. Accountants
 Total revenue
 Explicit and Implicit costs
 Economic costs and profits
B. Costs of Production (graph)
 Fixed Costs, Variable costs, and Total costs
 Per-unit costs (AVC, AFC, ATC)
 Shifts in MC, ATC. AVC, and AFC
 Marginal costs and Marginal revenue
 Sunk costs
C. Law of Diminishing Marginal Returns (graph)
 Stage I: increasing returns
 Stage II: decreasing returns
 Stage III: negative returns
D. Long-run Production Costs (graph)
 Economies of scale, Constant Returns to scale, Diseconomies of scale
E. Characteristics of Perfect Competition
 Price takers
 Demand = MR= Price
 Graph: Firm vs. industry (market)
 Short-run (profit or loss)
 Long-run equilibrium (New firm enter and exit)
 Normal profit
 Shutdown decision (P< AVC)
 Productive efficiency (P = Min ATC)
 Allocative efficiency (P = MC)
2nd Quarter
Unit 4 Imperfect Competition
(Chapters 10&11. McConnell & Brue)
A. Characteristics of Monopolies
 Barriers to entry
 MR below demand (graphs)
 Profit-maximizing price and quantity
 Natural monopoly
B. Effects on overall economy
 Compared to competitive industry
 Dead-weight loss
 X-efficiency
C. Price discrimination (graph)
 Purpose and results
 Graph (MR=D)
D. Regulation
 Unregulated price, Fair return price, and Socially optimal price
 Taxes and subsidies
E. Characteristics of Monopolistic Competition
 Long-run equilibrium (graph)
 Excess capacity
 Non-price competition
 Product differentiation
F. Characteristics of Oligopolies
 Kinked demand curve-competitive pricing
 Game theory (chart) price leadership
 Collusion and cartels
Unit 5 Resource Market
(Chapters 12, 13& 14. McConnell & Brue)
A. Demand for labor
 Derived demand
 Marginal revenue product
 Marginal resource cost
B. Perfectly competitive labor market (graph)
 Wage makers
 Perfectly elastic supply of labor
C. Monopsony (graph)
 Wages and quantity compared to perfectly competitive labor market
D. Labor Unions
 Goals and methods
E. Effects of Minimum Wage
F. Wage differentials
 Investment in human capital vs. physical capital
G Rent, Interest and Profit
 Distribution of Income
 Capital and Interest
 Loanable Funds market
Unit 6 Market Failures and Government Involvement
(Chapters 16, 17& 20. McConnell & Brue)
A. Public goods
 Demand for public goods
 Supply of public goods
 Free-rider problem
 Non-excludability and Non-rivalry
B. Positive externalities/spillover benefits (graph)
 Marginal social benefits vs. private benefits
 Underallocation
 Government remedy
C. Negative externalities/spillover costs (graph)
 Marginal social cost vs. private cost
 Overallocation
 Government remedy
D. Economics of Taxation (Tax Burden)
Progressive tax systems
Regressive tax systems
Proportional tax systems
E. Income distribution
 Lorenz curve (graph)
 Tax incidences
Macroeconomic Outline (2nd Semester)
Third Quarter
Unit 7: Macroeconomic Data and Measurement
(Chapters 23 &24 McConnell& Brue)
A. Introduction to Macro
 Basic Concepts
 Long Run vs. Short Run
 Demand Shock vs. Supply Shock (Sticky Prices)
B. GDP (Nominal and Real values)
 Expenditure approach
 Income Approach
Unit 8: Inflation and Unemployment
(Chapters 25 &26 )
A. Economic Growth
 Rate of Economic Growth
 Real GDP
 Economic Growth and PPC
 Labor Productivity
B. Business Cycle
C. Inflation
 CPI
 Demand- Pull and Cost Push
D. Unemployment
 Types of unemployment
 GDP Gap and Okun’s Law
Unit 9: Consumptions vs. Savings
(Chapters 27& 28)
A. Average and marginal Propensities to Consume and Save
 MPC and MPS as Slopes
B. Interest Rates
 Expected Rate of Return
 Real Interest Rates
C. Multiplier Effect
 Changes in Spending and changes in Real GDP
D. International Trade and the Public Sector
 Recessionary Gap vs. Inflationary Gap
Fourth Quarter
Unit 10: Aggregate Demand and Aggregate Supply
(Chapters 29 & 35)
A. Aggregate Demand
 Changes in Aggregate Demand
 Aggregate Demand Curve
 Determinants of AD
B. Aggregate Supply
 Output in Immediate Short Run, Short Run and Long Run
 Aggregate Supply Curve
 Determinants of AS
C. Fiscal Policy
 Expansionary vs. Contractionary Fiscal Policy
 Built in Stabilizers
 Crowding Out effect
Unit 11: Money and Banking& Long Run AS
(Chapter 30, 31, 32, 33& 35)
A. Money
 M1
 M2
B. Banking
 Federal Reserve System
 Globalization of Financial markets
C. Money Creation and Monetary Policy
 Reserve Requirement and Discount Rate
 Reserve Ratio
 Monetary Multiplier
 Interest Rates
 Taylor Rule (Federal Funds Rate)
D. Long Run Aggregate Supply
 Short Run AS vs. Long Run AS
 Long Run Equilibrium
 Demand –Pull Inflation
 Phillips Curve and Stagflation
E. Supply Side Theory
 Laffer Curve
 Application of Supply Side Theory
Unit 12: Exchange Rates/ Trade Deficit
(Chapter 37 &38)
A. International Trade
 Key facts and Basis for Trade
 PPC
 Comparative advantage
 Gains from Trade
 Free Trade vs. Protectionist Theory (WTO)
B. Balance of Payments
C. Flexible Exchange Rates
D. Fixed Exchange Rates
Macroeconomics Final Exam