AP MACROECONOMICS
Course Description:
This course will examine fundamental principles of macroeconomics. The course will be
divided into six units covering the following topics: basic economic concepts (review),
measuring economic performance, aggregate demand and supply, money and monetary
policy, monetary and fiscal policy combinations, and international economics.
Length:
One Semester
Student Resources:
Boyes, William, and Michael Melvin. Economics. 6th ed. Boston, MA: Houghton Mifflin
Company, 2005.
Morton, John S., and Rae Jean B. Goodman. 2003. Advanced Placement Economics:
Microeconomics, Student Activities. 3rd ed. New York: National Council on Economic
Education.
Teacher Resources:
Boyes, William, and Michael Melvin. Economics. 6th ed. Boston, MA: Houghton Mifflin
Company, 2005
Clayton, Gary E., and Martin Gerhard Giesbrecht.
Statistics, 6th ed. New York: McGraw-Hill, 2004.
A Guide to Everyday Economic
Dodge, Eric. 5 Steps to a 5. New York: McGraw-Hill, 2005.
Krugman, Paul, and Robin Wells. Economics. New York: Worth Publishers, 2006
McConnell, Campbell R. and Stanley L. Brue.
Policies, 16th ed. New York: McGraw-Hill, 2005.
Economics: Principles, Problems,
Morton, John S., and Rae Jean B. Goodman. 2003. Advanced Placement Economics:
Teacher Resource Manual. 3rd ed. New York: National Council on Economic Education.
Grading Policy:
70%
20%
10%
Final grades will reflect total points earned on the following:
Tests and Final
Multiple choice and free-response test after each unit. (Unit 3 will have 2 tests)
Free-response tests are from released prior AP tests.
In-class work, homework (including released AP tests), quizzes
Economics Language Papers (ELP’s) 4 per semester (Instructions Attached)
Course Outline: NOTE: Detailed study guides are provided for each unit
Unit 1
Basic Economic Concepts (Review of 1st Semester Microeconomic Concepts)
Boyes/Melvin Chapters 2, 3 and 20
10 Class periods
Unit 2
Measuring Economic Performance
Boyes/Melvin Chapters 6, 7 and 8
8 class periods
Unit 3
Aggregate Demand and Aggregate Supply: Fluctuations in Outputs and Prices
Boyes/Melvin Chapters 9, 10, 11 and 12
23 class periods
Unit 4
Money, Monetary Policy and Economic Stability
Boyes/Melvin Chapters 13 and 14
14 class periods
Unit 5
Monetary and Fiscal Policy Combinations: Stabilization Policy in the Real World
Boyes/Melvin Chapters 15, 16, 17, 18 and 34
13 class periods
Unit 6
International Economics
Boyes/Melvin Chapters 19, 35, 36, 37 and 7 (Review
7 class periods
Unit 1 Basic Economic Concepts
Boyes/Melvin
Chapters 2, 3 and 20
Outline of Economic Concepts
NOTE: This Unit is used as a review and is covered in detail during the first semester microeconomics
course.
1.
2.
3.
4.
Scarcity: The Nature of Economic Systems
A.
Scarcity, Choice and Opportunity costs
B.
Production possibilities curves
Specialization, Trade and Comparative Advantage
A.
Determining comparative advantage with input information
B.
Determining comparative advantage with output information
Demand
A.
Relationship between price and quantity demanded
B.
Determinants of demand
C.
Changes is quantity demanded vs. changes in demand
Supply
A.
Relationship between supply and quantity supplied
B.
Determinants of supply
C.
Changes is quantity supplied vs. changes in supply
D.
Introduction to Elasticity of Demand and Supply
Vocabulary
Opportunity costs, tradeoff, marginal cost, marginal benefit, production possibilities curve, marginal opportunity
cost, comparative advantage, market, barter, transaction costs, relative price, demand, quantity demanded, law of
demand, determinants of demand, demand schedule, demand curve, normal goods, inferior goods, substitute goods,
complementary goods, supply, quantity supplied, law of supply, determinants of supply, supply schedule, supply
curve, equilibrium, disequilibrium, surplus, shortage, price floor, price ceiling, price elasticity of demand, perfectly
elastic demand, perfectly inelastic demand, price elasticity of supply, short run, long run
Graphs/Tables
Production Possibilities Curve
Comparative Advantage
Demand (Curve and Schedule)
Changes in Demand
Supply (Curve and Schedule)
Changes in Supply
Equilibrium Price and Quantity
Shortage and Surplus
Demand and Supply Elasticity
Total Revenue and Price Elasticity of Demand
Equations
Price Elasticity of Demand
Price Elasticity of Supply
Unit 2 Measuring Economic Performance
Boyes/Melvin
Chapters 6, 7 and 8
Outline of Economic Concepts
A.
B.
C.
D.
E.
F.
Circular Flow of Income
Macroeconomic Goals
Macroeconomic Measurement
1.
Gross domestic product
2.
Economic growth
3.
Price level
4.
Employment
Inflation and Price Indexes
1.
Difference between price level and inflation
2.
Different price indexes
3.
Nominal vs. real quantities
Unemployment
1.
Unemployment rate
2.
Labor force participation rate
3.
Types of unemployment
4.
Natural rate of unemployment
Business Cycles
1.
Phases of business cycle
2.
Definition of recession
Vocabulary
national income accounting, gross domestic product, intermediate good, value added, inventory, capital consumption
allowance, depreciation, indirect business tax, gross national product, net national product, gross investment, net
investment, national income, personal income, transfer payment, disposable personal income, nominal GDP, real
GDP, price index, base year, GDP price index, consumer price index, cost of living adjustment, producer price
index, foreign exchange, foreign exchange market, exchange rate, balance of payments, current account, surplus,
deficit, balance of trade, financial account, business cycle, recession, depression, leading indicator, coincident
indicator, lagging indicator, unemployment rate, labor force, discouraged workers, underemployment, types of
unemployment, potential real GDP, natural rate of unemployment, inflation, nominal interest rate, real interest rate,
demand-pull inflation, cost-push inflation, hyperinflation
Graphs/Tables
Circular Flow
Account Balance
Business Cycle
Indicators of Business Cycle
Equations
Calculation of GDP
unemployment rate
purchasing power
real interest rate
Unit 3 Aggregate Demand and Aggregate Supply: Fluctuations in Outputs and Prices
Boyes/Melvin
Chapters 9, 10, 11 and 12
Outline of Economic Concepts
A. Aggregate Expenditure
1. Keynesian Equilibrium
2. Government expenditure, investment and tax multipliers
3. Effects of investment spending decisions on national output
4. Inventory changes in response to difference between aggregate expenditures and
income.
B. Aggregate Demand
1. Difference between aggregate demand and microeconomic concept of demand
2. Components of aggregate demand
3. What effects each of the components of aggregate demand
4. Determinants of the slope of the aggregate demand curve
5. Determinants of shifts in the aggregate demand curve
C. Aggregate Supply
1. Determinants of aggregate supply
2. Alternative aggregate supply curve shapes
3. Effects of the labor market on aggregate supply
4. How wages are determined
5. Sticky and flexible wages impact on price
D. Macroeconomic Equilibrium
1. Aggregate demand and aggregate supply together
2. Short-run equilibrium
3. Effects of aggregate supply and aggregate demand shocks (cost-push and demand-pull inflation)
4. Long-run equilibrium and production possibilities curve
5. Analysis of the economy moving from the short-run to the long-run equilibrium
E. Fiscal Policy
1. Effects of changes in government spending
2. Effects of changes in taxation
3. Automatic stabilizers
4. Short-run effects on outputs and the price level of fiscal policy
Vocabulary
demand-pull inflation, cost-push inflation, wealth effect of spending, interest rate effect of spending, international
trade effect of spending, aggregate demand curve, aggregate supply curve, long-run aggregate supply curve,
consumption function, saving function, dissaving (negative saving), autonomous consumption, marginal propensity
to consume (MPC), marginal propensity to save (MPS), average propensity to consume (APC), average propensity
to save (APS), determinants of consumption, determinants of investment, marginal propensity to import (MPI),
Keynesian view of how equilibrium real GDP is determined, spending leakages and injections, equilibrium income,
spending multiplier, recessionary gap, crowding out, discretionary fiscal policy, automatic stabilizers, deficit, debt,
interest payments, progressive tax, transfer payment, direct and indirect tax, value-added tax
Graphs/Tables
aggregate demand and supply equilibrium
demand-pull inflation and cost-push inflation
aggregate demand curve
nonprice determinants of aggregate demand
aggregate supply curve (short-run and long-run)
nonprice determinants of aggregate supply
Aggregate demand and supply equilibrium (short-run and long-run)
consumption function
saving function
MPS and MPC
autonomous shifts in consumption and saving
government expenditures and function of real GDP
net exports as a function of real GDP
aggregate expenditure function
equilibrium level of real GDP (Y) (plus leakage and injection)
GDP and recessionary gap
deriving aggregate demand curve
fixed-price AD-AS Model (Keynesian)
Laffer Curve
Fiscal Policy Flow Chart
Equations
MPC
MPS
APC
APS
return on investment
MPI
spending multiplier
recessionary gap
Unit 4 Money, Monetary Policy and Economic Stability
Boyes/Melvin
Chapters 13 and 14
Outline of Economic Concepts
A. Money and the Banking System
1. Definitions of money
2. Function of money
3. Relationship of money supply to nominal gross domestic product
4. Creation of money and the deposit expansion multiplier
B. Monetary Policy and Aggregate Demand
1. tools of the central bank
2. How the Federal Reserve’s tools change the money supply
3. How the interest rate is determined in the money market (crowding-out effect)
4. The transmission mechanism of changes in the money supply to output and the
price level
C. Real versus Nominal Interest Rates
1. Definition of real and nominal interest rates
2. Fisher equation showing the relationship between real and nominal interest rates
3. Short-run effects of monetary policy on real and nominal interest rates
4. Long-run effects of monetary policy on real and nominal interest rates
Vocabulary
money, liquid asset, currency substitution, credit, M1 money supply, transactions account, M2 money supply, M3
money supply, international reserve asset, international reserve currency, European currency unit ECU, composite
currency, special drawing right SDR, Federal Deposit Insurance Corporation, Eurocurrency market or offshore
banking, international banking facility IBF, ROSCA, hawala, fractional reserve banking system, required reserves,
excess reserves, deposit expansion multiplier, structure of Fed, Federal Open Market Committee FOMC,
intermediate target, equations of exchange, velocity of money, quantity theory of money, FOMC directive, federal
funds rate, legal reserves, discount rate, open market operations, foreign exchange market intervention, sterilization,
transactions demand for money, precautionary demand for money, speculative demand for money,
Graphs/Tables
velocity of the M1, M2 and M3 Money Supplies
Exchange market
money demand
change in money demand
money supply
equilibrium in the money market
monetary policy and equilibrium income
Equations
deposit expansion multiplier
equation of exchange
current interest rate on bonds
Unit 5 Monetary and Fiscal Policy Combinations: Stabilization Policy in the Real World
Boyes/Melvin
Chapters 15, 16, 17, 18 and 34
Outline of Economic Concepts
A. Monetary and Fiscal Policy
1. Monetary and fiscal policy working together
2. The loanable funds market and relationship to the money market
3. The interest rate effects of fiscal policy
B. Trade-off between Inflation and Unemployment
1. Short-run Phillips curve
2. Long-run Phillips curve
3. Effect of expectations
C. Economic Growth
1. Sources of economic growth (human and physical capital)
2. What policies promote economic growth
3. Showing economic growth using aggregate demand and aggregate supply analysis
4. Showing economic growth using the production possibilities curve
D. Reasons for disagreements among economists about macroeconomic policies and
effects of the policies (supply-side vs demand-side)
Vocabulary
Phillips curve, reservation wage, adaptive expectation, rational expectation, time inconsistent, government budget
constraint, monetary reform, Keynesian Economics, monetary economics, Milton Friedman, classical economics,
new classical economics,
economic growth, rule of 72, per capita real GDP, total factor productivity, determinants of productivity, obstacles
to growth, expropriation, primary product, import substitution, export substitution, terms of trade, dual economy,
foreign direct investment, portfolio investment, commercial bank loan, trade credit, foreign aid, bilateral aid.
multilateral aid, privatization, monetary overhang, currency convertibility, Lorenz curve, cash transfers, in-kind
transfers, determinants of poverty, progressive income tax, proportional tax, regressive tax, gini ratio (index),
negative income tax,
Graphs/Tables
Phillips curve
Shifting Phillips curve
Long-Run Phillips curve
Keynesian model
classical model
Lorenz curve
Gini ratio (index)
Equations - government budget constraint
Unit 6 International Economics
Boyes/Melvin
Chapters 7 (Review), 19, 35, 36 and 37
Outline of Economic Concepts
A. International Trade
1. Comparative advantage
2. Gains from trade
3. Consequences of government intervention into international trade
B. International Finance
1. The current account, capital account and the balance of payments
2. Exchange markets (Demand for and supply of foreign exchange)
3. How domestic and foreign economies affect the exchange rate
4. Currency appreciation and depreciation
5. Net exports and capital flow
C. Domestic Monetary and Fiscal Policy and International Economics
1. Income effects
2. Price effects
3. Interest rate effects
Vocabulary
Measuring globalization, “race to the bottom”, Asian tigers, NIC, exchange rates, absolute advantage, comparative
advantage, terms of trade, export supply curve, import demand curve, commercial policy, strategic trade policy,
increasing-returns-to-scale industry, tariff, quantity quota, value quota, export subsidies, free trade area, customs
union, gold standard, gold exchange standard, IMF, World Bank, foreign exchange market intervention,
devaluation, equilibrium exchange rates, appreciate, depreciate, fundamental disequilibrium, speculators, purchasing
power parity, interest rate parity,
Graphs/Tables
export supply curve
import demand curve
theories of comparative advantage
intraindustry trade
effects of tariff
effects of a quota
supply and demand of foreign exchange
Equations
Comparative advantage
purchasing power parity
interest rate parity
Economic Literacy Paper (ELP)
Instructions
I.
Procedure: For each ELP you will
A.
B.
C.
II.
Finding the Article
A.
B.
C.
III.
C.
D.
E.
F.
Attach a copy of the article.
Underline the relevant parts of the article.
Cite the source at the beginning of the paper. (Title, Author, Source,
Pages, Date, or URL)
State the specific economic concept to which the article applies
Thoroughly explain the economic concept
Show how your article exemplifies the economic concept
(D and E should be written in a manner that would make sense to
someone who knows little or no economics)
Length of the paper should be at least one but no more than two
typewritten pages, excluding graphs.
Grading
A.
B.
V.
Browse through any current issues of financial periodicals. Though any
financial source will do, “marketwatch.com” is a great site for these
types of articles.
The length of the article isn’t as important as its relevant content, but it
should not be so brief as to be almost meaningless.
Make sure you pick an article that relates to an economic concept you
feel very comfortable writing about.
Format of Paper
A.
B.
IV.
State specific Economic Concept (from study guides) which your article
exemplifies.
Explain the economic concept
Show how your article exemplifies the concept. Show the relationship
that exists between your article and the concept.
Choice of article – is it suitable to explain the objective?
Logical analysis of relationship between economic concept and article.
Frequency
A.
B.
Two ELP’s per 10 week grading period (10% of grade)
A third may be done each 10 week grading period for extra credit.