Celio/Maher: 2013-14
Briar Woods High School
Advanced Placement Economics 2013- 2014
Mr. Celio: steve.celio@lcps.org
Mr. Maher: wmaher@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 #1: Hazlitt, Henry (1988 reprint). Economics in One Lesson.
Outside reading #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?
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 two semester course. (Syllabus: Micro and Macro)
First Semester: The focus of study during the first semester is 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.
Second Semester: The focus of study during the second semester is 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.
Celio/Maher: 2013-14
Microeconomic Outline (1st Semester)
(THIS OUTLINE IS SUBJECT TO CHANGE. FOR A DETAILED AGENDA AND
OUTLINE PLEASE CHECK THE CLASS CMS WEB PAGE !)
1st Quarter
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
Celio/Maher: 2013-14
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
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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
Celio/Maher: 2013-14
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
Regressive
Proportional
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
Celio/Maher: 2013-14
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
Celio/Maher: 2013-14
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
 Gains from Trade
 Free Trade vs. Protectionist Theory (WTO)
B. Balance of Payments
C. Flexible Exchange Rates
D. Fixed Exchange Rates
Macroeconomics Final Exam
Course Requirements and Resources:
Notebook organization:
You will need a three-ring binder for this. 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.
Problem Sets:
These will be handed out for each unit, and will be due two blocks before the unit test. They will include
multiple choice, short answer, and free response questions, and will double as a test review.
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]
Celio/Maher: 2013-14
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; Laffer Curve
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
Celio/Maher: 2013-14
Chapter Quizzes:
There will be one quiz for almost every chapter, although in rare instances there will be two or none. These will
consist primarily of multiple-choice questions covering both vocabulary and content.
Unit Tests:
These will consist of 50 multiple choice questions which will account for 100 points and two free-response
questions that will count for 50 points, although they will not always be 25 points each
Application Exercises:
This will generally be one or two free responses designed to reinforce the concepts learned in the unit, AS
WELL AS EARLIER UNITS.
Classroom Activities:
These are typically practice problems, graphing activities, or short answer questions designed to reinforce the
content covered that day. They will be done in an individual/pair format.
Grades
AP Economics is primarily a reading, lecture, discussion and theory course. All major tests will be announced
well in advance and will be multiple-choice questions and free response questions. Frequent reading/vocabulary quizzes
will be given to assess students’ understanding of their reading. All grades will be on a point system for each quarter. All
though there will be exceptions, each assignment generally will be worth the following number of points:
Grades:
Assignment
Points
Assignment
Test
150
Application Exercises
Problems Sets
50-75
Class Activities
Reading/Vocabulary Quiz
10-20
Projects
**Each student is expected to monitor his or her own progress via Clarity**
Points
15-20
5-10
100
1. All tests, quizzes, projects and homework will be assigned a point value. Your quarter grade will be
determined by the total number of points earned, versus the total number of points assigned.
2. There will be a major project worth 100 points assigned each quarter.
1st Quarter: Economic Literacy Project
2nd Quarter: Book Report (Economics in One Lesson)
3rd Quarter: Book Report (Naked Economics)
4th Quarter: TBA
3. Students will have frequent reading/vocabulary quizzes. (5-10 points each)
4. Late work policy:
1. 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.
2. The current event notebooks and class notebooks will be due on the dates identified on the calendar, and
will be assessed a 50-point penalty for each day they are late.
3. Homework assignments will not be accepted late except in the cases of excused absences. A grade of
20% will be given for missed homework assignments.
4. Upon return from an absence check with Mr. Maher to see what you missed. Get any assignments and
complete them for the next class. If you missed notes please get them from a classmate.
Celio/Maher: 2013-14
5. Students will take a mid-term and final exam. ALL STUDENTS ARE REQUIRED TO TAKE THE
MID–TERM AND FINAL EXAM (LCPS Senior Exemption Policy will be followed)
Grading Distribution:
1st quarter
20%
2nd quarter
20%
Mid-term exam
10%
3rd quarter
20%
4th quarter
20%
Final exam
10%
Frequently Asked Questions:
When are the AP Economics Exams? Thursday, May 15, 2014 (Macro is in the morning, Micro in the
afternoon).
Will there be separate finals for Macro and Micro? Yes. The Micro final will be the mid-term exam and the
Macro final will be the final exam. Time will determine when we do the Macro final. After our last Macro
unit, we’ll go back and review Micro and then spend a week in preparation for the AP Exams.
What is the structure of the AP exams? The exam is the same format for micro and macro: 60 multiple
choice questions in 70 minutes, and 3 free response (1 long and 2 short) in 50 minutes (the long question is
worth 50% of the free response score). The multiple choice section is worth 2/3 of the total score. Typically,
getting 60% of the multiple choice correct is enough to pass the exam (assuming the free responses are similarly
competent).
What schools offer credit for these exams? Check with your schools directly. College-Board also has a good
way to do it on-line at http://www.collegeboard.com/ap/creditpolicy. Some schools offer credit for threes,
many for fours, and at some, credit is only offered for fives. A very few do not offer credit.
Guidelines for Success:
1.
2.
3.
4.
5.
Read and outline chapters, complete the multiple choice sections for each chapter.
Correct mistakes on your assignments. Fix the errors that exist in your mind before moving on!
Learn and love the graphs used in Economics, and maintain a graph section in your notebook.
Create study groups and work together, but find students with work ethics similar to your own.
Review, review and review some more. The more you review information, the more you will
remember.
Important Notes:
1.
2.
All school rules (e.g. Honor Code, tardy policy, phone/iPod rules, etc.) will be enforced in class.
Many items will be sold in this class to demonstrate a variety of economic activities. All net
proceeds will be pooled and used at the end of the year to pay for breakfast on the day of the exam or
other class food purchases.
Due : __________
____________________________________
Student Signature
Date
____________________________________
Student name (print)
_________________________________ _____________
Parent Signature
Date
Mr. Maher (Room T-4)
* Parents please read and discuss these grading policies and procedures with your son or daughter
before signing. This form must be returned to the teacher. A duplicate copy will be offered in
exchange for a signed copy. Thank you for your cooperation.