officially authorized by the college board!




Grade AP Economics

Man insisted on some sort of intellectual ordering to help him understand the world in which he lived. The harsh and disconcerting economic world looked ever more important. No wonder Dr.

Samuel Johnson himself said “There is nothing which requires more to be illustrated by philosophy than trade does. In a word, the time for the economists had arrived.

Robert Heilbroner in The Worldly Philosophers


Phone :




Workbook: Morton, John S. (2003). Advanced Placement Macroeconomics Student Activities ,

3 rd

Arnold, Roger A. (2005). Economics, 7 th Edition . Southwestern/Thomson Publishing

Edition. National Council on Economic Education (NCEE)

Summer Reading: Wheelan, Charles (2002). Naked Economics: Undressing the Dismal

Science . New York: Norton Publishers

Course Assignments, Activities, and Assessments for the Units of Study:

 Tests (1 per unit) and quizzes

 Homework

 Projects, both group and individual, online and in class

 Lectures and Note-taking

 Morton Workbook Activities

 Economic simulations

 Daily Class and Homework Assignments are available online at

Following is the sequence and units of study for the AP Macroeconomics course including overview of topics covered as required by the College Board, major objectives, correlating textbook chapters, homework assignments, Morton activities, and simulations.

This sequence of study is based on recommendations and guidelines in the Advanced Placement

Economics (3 rd

edition) Teacher’s Resource Manual by John Morton, published by the National

Council on Economic Education (NCEE) in 2003.

The simulations come from Economics in Action: 14 Greatest hits for Teaching High School

Economics by Jane Lopus and Amy Willis (editors), published by the National Council on

Economic Education (NCEE) in 2003.

I. Basic Economic Concepts (8-12%)


Scarcity, choice and opportunity costs


Production possibilities curves



Specialization, comparative advantage and exchange


Demand, supply, and market equilibrium


Macroeconomic issues: business cycle, unemployment, inflation, growth

Major Objectives:

 Discuss how the concept of scarcity underlies the study of economics

 Graph the Production Possibilities Curve

 Show opportunity costs on the Production Possibilities Curve

 Calculate comparative advantage

 Discuss how specialization and trade improves standard of living

 Show efficient, inefficient, and unattainable levels of production using the Production

Possibilities Curve

Show economic growth in the Production Possibilities Curve

 Graph supply and demand

Analyze price and quantity equilibrium using the supply and demand model

Explain the reasons and effects for changes in supply and demand

Assigned Readings in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs






What Economics is About



Homework q/p #1-20 (completed over the summer)

Economics Activities: Producing and trading 25-33 q/p #1,3,5

Supply and Demand: theory n/g # 1, 3-7

34-59 q/p # 10, 11, 15

4 Supply and Demand: Practice


 A Market in Wheat

 Property Rights in a Market Economy

 The Role of Government in a Market Economy



 Lesson 1: Introduces scarcity, opportunity cost, production possibilities and comparative advantage

 Morton 1: Scarcity, Opportunity Cost, and Production Possibility Curves

Morton 2: Opportunity Cost and Comparative Advantage

 Morton 49: Determining Comparative Advantage

Morton 50: Economic Efficiency and Gains from Trade

 Production Possibilities as Applied to World War II

 Lesson 2: Introduces the concept of demand and factors that shift the demand curve

 Morton 3: Demand Curves, Movements Along and Shifts in Demand Curves

 Morton 4: Reasons for Changes in Demand


Lesson 3: Introduces the concept of supply and factors that shift the supply curve

 Morton 5: Supply Curves, Movements Along and Shifts in Supply Curves

 Morton 6: Reasons for Changes in Supply

Lesson 4: Brings concepts of supply and demand together to determine equilibrium price and quantity

 Morton 7: Equilibrium Price and Quantity

 Practice S/D scenarios using whiteboards

II. Measurement of Economic Performance (12-16%)


National income accounts


Circular flow


Gross Domestic Product


Components of Gross Domestic Product


Real vs. nominal GDP


Inflation measurement and adjustment


Price indices


Nominal and real values


Costs of inflation




Definition and measurement


Types of unemployment


Natural rate of unemployment

Major Objectives:

 Diagram and explain the Circular Flow of the economy

 Identify what is excluded and included in calculating Gross Domestic Product (GDP)]

 Differentiate between nominal and real GDP

 Convert nominal GDP to real GDP

 Define and apply the formula for calculating GDP using the expenditure and income approaches

Identify and differentiate between types of unemployment

 Calculate the unemployment rate

Calculate the employment rate

 Calculate the Labor Force Participation Rate

 Define Full Employment

 Calculate the inflation rate

 Explain and analyze the construction of a price index

Differentiate between different types of inflation (cost push, demand pull)

 Identify the groups are harmed or helped by unanticipated inflation

Discuss limitations inherent in the use of the measures of GDP, unemployment and inflation

Assigned Readings in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs






Macroeconomic Measurement Part I:

Prices and Unemployment

Macroeconomic Measurement Part II:

GDP and Real GDP




Homework n/g # 1-2, 4-8, 10 n/g # 1-3, 5, 10-11


 The Circular Flow of Economic Activity


 Lesson 1: Defines macroeconomics and describes the main components of the economy and

their interaction

 Morton 9: Test of Macroeconomic Thinking

 Morton 10: Understanding the Circular Flow

 Lesson 2: Focuses on measuring key economic variables

 Morton 11: Measuring Broad Economic Goals

 Morton 12: All About GDP

 Lesson 3: Addresses a key macroeconomic goal in looking at the effects of inflation and the creation of a price index

 Morton 13: Price Indexes and Inflation

 Morton 14: Inflation Game: Royalty for a Day

 Morton 15: Who is Hurt and Helped by Unanticipated Inflation?

 Lesson 4: Delves into how unemployment, employment, and labor force participation are defined

 Morton 16: Types of Unemployment

 Lesson 5: Examines the business cycle and pulls together all the concepts about economic growth, inflation, and unemployment

 Morton 17: The Business Cycle

 Morton 18: Test Your Understanding of Macroeconomic Indicators

III. National Income & Price Determination (10-15%)


Aggregate demand


Determinants of aggregate demand


Multiplier and crowding-out effects


Aggregate supply



short run and long run analysis


sticky versus flexible wages and prices


determinants of aggregate supply


Macroeconomic equilibrium


Real output and price level


short and long run


actual versus full employment output


economic fluctuations

Major Objectives:

 explain propensity to consume and save

 differentiate between the APC/S and MPC/S

Calculate the propensities to consume and save

 Apply the propensity to consume/save into determining the multiplier

Explain the different effects of the government spending and tax multipliers

Identify the determinants of Aggregate Demand

 Identify the determinants of Short Run Aggregate Supply

Identify the determinants of Long Run Aggregate Supply

 Graph AD, SRAS, and LRAS

Graph and identify the equilibrium price level and output

 Analyze the changes in the Price Level and Output when shifts occur in AD and SRAS

Explain what is meant by sticky prices and wages

 Graph and explain the output and price level of the economy in a recessionary gap

 Graph and explain the output and price level of the economy in an inflationary gap

Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs

Chapter Title Pages Homework

7 Aggregate Demand and Aggregate Supply

8 The Self Regulating Economy

165-194 n/g # 2-5

Chapter 7 packet from

Arnold study guide

195-214 q/p # 1-9 n/g # 1-2


 Lesson 1: Introduces Average and Marginal Propensities to Consume and Save and the Role of the Multiplier

Morton 20: Practice with APC/S and MPC/S

Morton 21: The Magic of the Multiplier


Lesson 2: Introduces Aggregate Demand and its determinants

Morton 22: Investment Demand

Morton 23: Introduction to Aggregate Demand

Lesson 2: Introduces determinants of Short Run and Long Run Aggregate Supply

 Morton 24: Introduction to SRAS

 Morton 28: Macroeconomic Model: Short Run to Long Run

Lesson 3: Brings AD, SRAS and LRAS together and the responses of the economy to shocks and other changes, analyzes the effect Ad, SRAS shifts on the Price Level and Output

 Morton 25: Short Run Equilibrium and Output

Morton 27: Manipulating the AS/AD model—Exogenous Shocks

 Lesson 4: Relates the Long Run Aggregate Supply Curve to the Production Possibilities


 Morton 29: The Long Run Aggregate Supply and Production Possibilities Curves

IV. Financial Sector (15-20%)


Money, banking, and financial markets


Definition of financial assets: money, stocks, bonds


Time value of money


Measures of money supply


Banks and creation of money


Money demand


Money market


Loanable funds market


Central bank and control of money supply


Tools of central bank policy


Quantity theory of money


Real versus nominal interest rates

Major Objectives:

 Define the functions of money

 Identify the three categories of and components in the Money Supply

 Graph and explain the demand for money

 Graph and explain the supply of money

 Explain the equilibrium interest rate using the Money Market graph

 Graph and explain the loanable funds market

Explain the equilibrium interest rate in the Loanable Funds Market

 Differentiate between the Money Market and the Loanable Funds Market

Explain the process by which banks create money through loans

Calculate and apply the money multiplier

 Explain the organization of the Federal Reserve

Identify the tools of Monetary Policy used by the Fed

 Graph and differentiate between expansionary and contractionary monetary policy


 Apply the tools of monetary policy to bring an economy back to equilibrium

Assigned Reading in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs

Chapter Title Pages Homework

11 Money and Banking

12 The Federal Reserve System

265-283 n/g # 1-5

284-296 n/g # 1-4

13 Money and the Economy

14 Monetary Policy


 Money and Inflation


324-345 n/g # 5


 Lesson 1: Intorudces Properties, functions, and definitions of money

 Morton 34: Money

 Morton 35: What’s All This About the Money Supply?

 Lesson 2: Explores the relationship between the money supply and GDP

 Morton 36: Equation of Exchange

 Lesson 3: Examines how banks create money through loans

 Morton 37: Multiple Expansion of Checkable Deposits

 Lesson 4: Introduces the Federal Reserve System and its tools to control the money supply

 Morton 38: the Federal Reserve and the Mechanics of Monetary Policy

 Lesson 5: Examines the money market and monetary policy

 Morton 39: The Money Market

 Morton 40: The Federal Reserve: Monetary Policy and Macroeconomics

 Lesson 6: Differentiates between real and nominal interest rates and the effects of monetary policy in the short and long run

 Morton 41: Real and Nominal Interest Rates

 Morton 42: Monetary Policy

V. Inflation, Unemployment, and Stabilization Policies (20-30%)


Fiscal and monetary policies


Demand-side effects


Supply-side effects


Policy mix



Government deficits and debt


Inflation and unemployment


Types of inflation (demand-pull, cost-push)


The Phillips Curve, short run vs. long run


Role of expectations

Major Objectives:

 Identify the types of lags in fiscal policy

Define stabilizers

 Differentiate between automatic and discretionary fiscal policy

Graph and differentiate between expansionary and contractionary fiscal policy

Apply the tools of fiscal policy to bring an economy back to equilibrium

 Differentiate between the federal deficit and the federal debt

Graph and analyze the effects of crowding out (using the money market and the loanable funds graphs)

 Apply and compare monetary and fiscal policies used to bring an economy out of a recessionary gap

 Apply and compare monetary and fiscal policies used to bring an economy out of an inflationary gap

 Graph the Short and Long Run Phillips Curve

Assigned Reading in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs

Chapter Title Pages Homework

9 Economic Instability: A Critique of the Self-

Regulating Economy


10 The Federal Budget and Fiscal Policy

15 Expectations Theory and the Economy

Read only the section on the Phillips Curve


346-350 n/g # 1-5 q/p # 5


 Fiscal Policy: A Two Act Play


 Lesson 1: Initiates the Study of Stabilization Policies

 Morton 30: Tools of Fiscal Policy

 Morton 31: Discretionary versus Automatic Fiscal Policy

 Morton 33: Analyzing the Macroeconomy

 Lesson 2: Discusses lags associated with policy making and the issue of crowding out

 Morton 43: Monetary and Fiscal Policy

 Morton 44: Crowding Out: A Graphical Analysis

 Lesson 3: Examines the interaction between monetary and fiscal policies


 Morton 45: Graphing Monetary and Fiscal Policy Interactions

Lesson 4: Discusses the short run and long run Phillips curve and the relationship to the AD  and AS model

 Morton 46: The Short Run Phillips Curve

VI. Economic Growth and Productivity (5-10%)


Investment in human capital


Investment in physical capital


Research & Development, and technological progress


Growth policy

Major Objectives:

 Explain the role of resources in determining a nation’s long run growth

 Explain the role of human capital in a nation’s economic productivity and long run growth

 Explain the role of research and investment in capital in improving a nation’s long run

 potential

Discuss why economists disagree on which policies best help a nation grow

Assigned Reading in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs


16 Economic Growth:


Resources, Technology, and Ideas

Pages Homework

345-365 n/g #1-3 q/p # 1-2


 Productivity


 Lesson 1: Examines sources of economic grow and how fiscal and monetary policies contribute to long term economic growth

 Morton 47: Economic Growth and the Determinants of Economic Productivity

 Lesson 2 : Explains reasons between the differences in policies advocated by various economists

 Morton 48: Why Economists Disagree

VII. Open Economy: International Trade and Finance (10-15%)


Balance of Payments


Balance of trade


Current account


Capital account



Foreign exchange market


Demand for and supply of foreign exchange


Exchange rate of determination


Currency appreciation and depreciation


Net exports and capital flows


Links to financial and goods markets

Major Objectives:

 Identify and explain the origin and goals of the World Trade Organization

Identify and explain the goals of the North American Free trade Agreement (NAFTA)

 Identify common barriers to trade and the reasons why nations may employ them

Differentiate between quotas and tariffs

Calculate comparative advantage and terms of trade

 Graph and explain the impact of quotas and tariffs on domestic price levels and production

Define and explain the components of o Current account o Capital account o Balance of trade o Balance of payments

Explain how the international value of a currency is determined

 Graph a currency market

Explain how fiscal and monetary policies effect the value of a currency in the international sector

 Graph and analyze how changes in a nation’s currency effect the domestic economy

 Explain and graph the effects of changes in net exports on domestic aggregate demand

Assigned Reading in the Roger Arnold Textbook

 q/p= Questions and Problems

 n/g= Numbers and Graphs


31 International Trade

Title Pages Homework

721-738 n/g # 1

32 International Finance 739-768 n/g # 1


 Comparative Advantage and Trade in a Global Economy

 Exchange Rates: Money Around the World


 Lesson 1: Reviews comparative advantage and the production possibilities curve

 Morton 49: Determining Comparative Advantage

 Morton 50: Economic Efficiency and Gains from Trade

 Lesson 2: Examines the effects of government intervention on international trade

 Morton 51: Barriers to Trade


Lesson 3: Introduces the basics of international finance in discussing the balance of payments and foreign exchange markets

 Morton 52: Imbalance of Payments

 Morton 53: Exchange Rates

Lesson 4: Explains the interaction of domestic stabilization policy and international trade and finance

 Morton 54: How Monetary and Fiscal Policies Affect Exchange Rates

 Morton 55: The international Way of Thinking