18 Week SyllabusClass : AP Macroeconomics Course Number: 2102370 Credit: 1 COURSE OBJECTIVES After completing AP Macroeconomics course, students should be able to do all of the following:
Units of Study and goals:General overview and content. The purpose of this course is to provide the student with a broad overview of the study of Macroeconomics Economics,. AP Economics is a 18 week course of instruction, the course will be content driven with a good deal of thought and theory. The ultimate goal is a successful score on the AP Exam at the end of the instruction period. To this end the student should have a well defined understanding of how economics effects them in their everyday life and what their responsibilities are as citizens and consumers. The content will include but not be limited to Unit 1: Basic Economic Concepts A. The central economic problem B. Production possibilities and opportunity costsC. The circular flowD. CapitalismE. Introduction to markets 1. Demand a) Relationship between price and quantity demanded b) Determinants of demand c) Changes in demand vs. changes in quantity demanded d) The law of demand explained 2. Supply a) Relationship between price and quantity supplied b) Determinants of supply c) Changes in supply vs. changes in quantity supplied d) Law of diminishing marginal returns 3. Market Equilibrium a) Price Determination b) Shortages and surplusesF. Economic Time Periods (Market Period, Short Run and Long Run)G. Elasticity 1. Price elasticity of demanda) Calculation, graphic representation, application 2. Price elasticity of supply a) Time periods 3. Income elasticityH. Price Controls1. Price floors2. Price ceilings I. The Great Economists (Smith, Marx and Keynes) Unit 2: Product Markets (Part 1: Costs and Perfect Competition) A. The Private Sector 1. Consumers 2. Business OrganizationsB. Firm Production and Costs 1. Introduction to firm behavior, profits (normal and economic) 2. Productivity and margin 3. Marginal, average, fixed, variable, implicit, explicit and total costs 4. Diminishing marginal returns 5. Graphing cost curves 6. Short run vs. long run curves 7. Economies and diseconomies of scaleC. Four Types of MarketsD. Perfect Competition 1. Market conditions 2. Market demand vs. single firm demand 3. Profit maximization (MR=MC) 4. Cost minimizing, shutting down and exiting the market 5. Supply curve 6. Long run behavior 7. Economic efficiency Unit 3: Product markets continued (Part 2: Imperfect Competition) A. Monopoly1. Market conditions2. Demand and marginal revenue3. Profit maximization4. Comparison to perfect competition5. Natural monopolies6. Government regulationsB. Other forms of imperfect competition1. Oligopoly2. Monopolistic Competition Unit 4: Factor Markets A. Resource Demand1. Factor demand is a derived demand2. MRP = MRCB. Wage Determination 1. How much to pay labor2. Real vs. nominal values3. Monopsony powerC. Other factors of production1. Least cost combination2. Profit maximization combination3. Economic Rent and Land4. Interest and Capital Unit 5: Government in the Economy A. The Public Sector1. Economic Role of the government2. The circular flow revisitedB. Government's role in mixed capitalism 1. Property rights2. Overview of other responsibilities3. Development of the government's economic role in US history C. Government and the allocation of resources1. Externalities2. Private vs. public goods3. Cost-benefit analysis 4. Economics of the environmentD. Government regulationsE. Expenditures and Revenues1. On what does government spend money?2. Taxesa) Types of taxesb) Fairness of taxes3. The federal debt and deficita) Definitionsb) How do they grow?c) Ramifications Unit 6: National Income, Employment and Fiscal Policy A. Economic GoalsB. Gross Domestic Product 1. GDP vs. GNP 2. Nominal vs. real GDP 3. Measurement of GDP a) C+I+G+(X) b) Production approach c) Weaknesses of measurementC. Price Indexes and Price Levels 1. Calculating CPI 2. The effects of changing price levelsD. The Business Cycle 1. Short run fluctuations of GDP 2. Long run economic growthE. Unemployment and Inflation Unit 7: National Income (Analysis) A. Aggregate Supply and Aggregate DemandB. Comparison of Classical and Keynesian Models 1. Equilibrium 2. Employment 3. Consumption and Savings 4. Investment 5. Wage/Price Flexibility 6. Aggregate SupplyC. The Keynesian Cross (Aggregate Expenditures Approach) 1. Multiplier Effect 2. Inflationary Gaps 3. Recessionary gaps D. Fiscal policy 1. Discretionary vs. Automatic Stabilizers 2. Applications of Fiscal Policy Unit 8: Money and Banking and Monetary Policy A. What is Money? 1. The M's 2. Demand for Money 3. Financial InstitutionsB. The Federal Reserve System1. Structure2. Pros and Cons of the Fed’s independence3. Functions of the FedC. Money Creation1. Reserve Accounts (Required Reserves and Excess Reserves)2. Money Multiplier3. Changes in the Money SupplyD. Monetary Policy1. The FED 2. Tools of Monetary Policy3. Open Market Operations4. The Bond Market5. Graphing Monetary Policy6. Monetary Policy and economic stabilization7. Limitations of Monetary Policy Unit 9: Topics in Macroeconomics A. Different Economic models1. Classical Model2. Keynesian Model3. Monetarism4. Rational Expectations Theory5. Supply Side B. Inflation and Unemployment 1. Phillips Curve (short run and long run)2. Stagflation3. Long-Run Aggregate SupplyC. Budget Deficits and the Federal DebtD. Economic Growth1. PPC and LRAS2. Productivity3. Combining Fiscal and Monetary Policy (Economic Stabilization) Unit 10: International Trade and World Economy A. Comparative Advantage1. Benefits of Trade2. Barriers to Trade3. Free Trade vs. ProtectionismB. International Finance1. Balance of Payments2. Exchange Rates3. Trade DeficitsC. International Trade and Domestic Policies 1. Impact of Domestic Economic Policies on International Trade Materials used: Textbook, overhead projector, transparencies, movies, tapes and guest speakers. Book: Economics, McConnell Brue, McGraw-Hill Fifteenth edition. Methods of performance measurement:
Unit One: Weeks 1-4 Questions:Ø What is the central economic problem? Ø Are people really rational?Ø What is a market and how does its structure predict firm behavior and market performance?Ø What distinguishes economists from accountants?Ø Does productivity ever diminish? List of Key Concepts and Graphs List of Key Terms Principles of economics economics Micro v macro marginal analysis Positive v. normative economics tradeoffs Fallacy of composition factors of production Ceteris paribus assumption production possibilities table Economizing problem capitalism Opportunity cost command system Production possibilities curve resource and product market Economics systems market demand Circular flow modes law of demand Demand schedule substitute and complementary goods Determinants of demand supply Quantity demanded law of supply Supply schedule equilibrium price Determinants of supply price ceilings and floors Quantity supplied private property Elasticity of demand competition Freedom of enterprise specialization Fundamental questions barter Consumer sovereignty normal and economic profit Invisible hand durable and nondurable goods Legal forms of businesses stocks Spillover costs ands benefits bonds Marginal and average tax rates transfer payment Comparative advantage appreciation Exchange rates depreciation Barriers to free trade free trade GATT, WTO, EU, NAFTA, G-8 Web References www.apcentral.collegeboard.org www.mconnell16.com www.whitehouse.gov/fsbr/esbr/esbr.htm/ www.rnc.org www.census.gov www.bls.gov. 1st Week & 2 Chapters 1 & 2Introduction to economics Pages 3-22The purpose of this section is to introduce the basic terminology and concepts of economics. Students are encouraged to consider what markets and governments can and cannot do. This section of the syllabus gives them an early opportunity to begin to explain economic phenomena through the use of diagrams, data analysis and the evaluation of economic material. This section is intended to make students aware of the role of economics in real-world situations. Even at this initial stage students should consider the application of economic theories to developing countries, since development economics is integral to the course.Objectives • Definitions of social science and economics• Definitions of microeconomics and macroeconomics• Definitions of growth, development, and sustainable development• Positive and normative concepts• Ceteris paribus• Scarcity• factors of production: land, labor, capital and management/entrepreneurship• payments to factors of production: rent, wages, interest, profit• Choice• utility: basic definition• opportunity cost• free and economic goods• production possibility curves: definition• diagrams showing opportunity cost, actual and potential output• diagrams showing economic growth and economic development• Rationing systems• basic economic questions• what to produce?• how to produce?• for whom to produce?• mixed economies• public• private• central planning versus free market• economies in transition. Note: The following plan is for the first two weeks and is given as an example for the type work that will be expected of the students. The remainder of the Syllabus is more general in nature and is provide as a general overview. Plan Class 1 Assignment: Class Basics McConnell (Ch1): pp. 3-13 Stock Market Game Free Lunch Handout The Magic of Markets The First Commodity Research Questions #1Find a news article (online or from a paper) that addresses an economic issue. Identify the economic issue at hand. In general, how much of the argument is based on positive economics as compared to normative economics? NOTE: Include your article with the assignment. Assignment:Class 2 Economic Assumptions/Goals McConnell (Ch 2): pp. 22-31 Discuss Reading Opportunity Cost Handout “Marginal” Experiment PPC Handout ResearchQuestions #2 Thoroughly explain the concept of opportunity cost with regards to the decisions our government must make in obtaining more military goods as compared to other countries. Make sure you state what exactly opportunity cost is within your explanation. You should examine the relative size of military expenditures of Japan, U.S., Germany, North Korea, and France. Who is bearing the larger opportunity cost and why? NOTE: A good source is the Central Intelligence Agency’s website (http://www.cia.gov/index.html). Once you are at this site, simply do a search for “military expenditures.” Then, click on “The World Fact Book – Percent of GDP.” AssignmentClass 3 Central Economic Problem McConnell (Ch 2): pp. 32-36 Factors of Production Production Poss. Curve (Ex) - “Office Space” Clip PPC & Opportunity Cost (Ex) Economic Efficiency Finish research Questions #1 PPC Receive Macro problems #1 Example below Problem Set #1 This problem set has five questions. Please make sure that your answers reflect a full consideration of the issues. Your work should be neat and careful. Do not write your answers on this sheet. Questions 1 and 2 require you to hand plot your graphs on graph paper (Do not use a computer spread sheet program). Due Dates: See Syllabus 1. Use the information from the following table to plot Deutschland’s production possibilities curve on a piece of graph paper and then answer the following questions. Point Consumer Goods Capital Goods A 0 5 B 1 4.75 C 2 4.5 D 3 3.5 E 4 2 F 5 0 a) What does the production possibilities curve illustrate? b) What is the opportunity cost when the nation moves from point C to point B? c) How would such a change influence the nation’s future standard of living?d) What’s true about the opportunity cost as one moves along the curve?e) Explain how the economy could produce a combination of 3 units of consumer goods and 3 units of capital goods without shifting the existing PPC.f) Explain what would happen (and why) if there are killer floods in Deutschland, thus, a significant decrease in the nation's population. (Also draw any change that might occur on your graph).g) Explain what would happen if cloning humans became the norm and those living in Deutschland started cloning all their relatives? h) What is the best combination of consumer and capital goods in Deutschland? 2. Assume that Michael Ballack (German soccer star) is selling autographed pictures in Deutschland to raise money for a charity soccer tournament. a) Using the schedules provided below, create a graph that illustrates the market for these priceless autographs. (Label completely) b) According to the table and graph, what is the equilibrium price and quantity of these autographed pictures? c) If Ballack charges $10 per autographed picture, what situation will exist in the market? (Use specific numbers and terms in your description, and illustrate on your graph) d) Given the situation described in part c) what would you do to clear the market (bring the market to equilibrium)? Use specific numbers in your response.e) Explain how and why the market for these autographed pictures would be affected if Bullock decided to expand his sales efforts to the entire European Union. Show the effects on your graph! Supply Demand P Q P Q $40.00 30 $40.00 5 $30.00 25 $30.00 10 $20.00 20 $20.00 20 $10.00 15 $10.00 45 3. Elasticity Questions: a) For each of the following pairs of goods, which item would you expect to have the greatest price elasticity of demand and why? (Discuss both items) i) Silver Honda Civic vs. Honda cars ii) Insulin (and you are diabetic) vs. a bottle of Mt. Dew. iii) A dvd player vs. a diamond necklace. b) Refer to the table in question 2 to answer the following questions: i) In the price range between $20 and $30, what is the coefficient of price elasticity of demand?ii) In the price range between $20 and $30, is the demand for Ballack autographed pictures price elastic, unit price elastic, or price inelastic? Explain how you know.iii) If Ballack decided to lower the price of his autographed pictures below the equilibrium price, would his revenue increase, decreases, or stay the same? Explain how you know.iv) In reality (ignore the numbers in parts 2 and 3) do you think the demand for these autographed pictures would be price elastic, unit price elastic, or price inelastic? Explain.v) If we didn’t take the absolute value, explain why the price elasticity of demand values would typically be negative. 4. a) Illustrate the demand and supply curves for the gasoline market and show the following: i) Price ii) Quantity b) Explain whether the demand curve for gasoline would be relatively more elastic or inelastic. c) Suppose a $5 per-unit tax is placed on the purchase of gasoline. Explain the impact of the tax on each of the following in the market for gasoline. i) Price paid by consumers ii) Quantity consumediii) Net price received by producers d) Illustrate the tax revenue collected due to the tax. Would more revenue be collected if demand for gasoline was more elastic or inelastic? e) Illustrate and explain the deadweight loss or excess burden to society. f) Illustrate and explain the change in consumer surplus and producer surplus after the tax is imposed on society. 5. The puffy vest industry is competitive and in equilibrium. (Draw one graph to illustrate the changes described in both a and b). a) The price of fluffy feathers (used in the production of puffy vests) increases. Explain and show what happens to the industry's output and price. b) In reaction to the changes above, the government imposes a price ceiling on puffy vests at its original price level. Explain how the price ceiling will affect the quantity demanded and the quantity supplied in the industry. c) Ignoring part b, instead the government imposes a price floor on puffy vests at its original price level. Explain how the price floor will affect the quantity demanded and the quantity supplied in the industry. End of Example AssignmentClass 4 Circular Flow Diagram McConnell (Ch 3): pp. 39-45 (Up to DBCC Tape Supply) Economic Systems Finish Macro problems #1 question #1 Chapter 2 Verbal Quiz Finish research Questions #2 (Econ Millionaire) Complete Allocation of Funds Review PPC Hand in research Questions #1 AssignmentClass 5 Demand McConnell (Ch 3): pp. 45-55 Hand in Macro problems #1 question #1 Demand and Supply Handout Hand in research Questions #2 Gas Pricing Brochure Stock Market Tape Stock Market Intro – darts Class 6 Demand Supply DBCC Tape Receive Web Questions #3 Web Questions #3Find data from 1970 – 2006 on oil prices. Have oil prices generally increased, decreased, or stayed the same over time? What do you think are the main forces underlying the price changes? Do you think that supply has increased more rapidly than demand? Do you think that demand has increased more rapidly than supply has decreased? Or, do you think that supply has decreased more rapidly than demand has increased? Explain your reasoning. NOTE: Do a simple google search on oil prices. There are several sites that include the relevant information. For example, check out http://www.eia.doe.gov/emeu/cabs/chron.html AssignmentClass 7 Supply McConnell (Ch 4): pp. 60-70 Price Determination Changes in Supply and Demand (Ex) Shortage vs. Surplus Quantity Demanded & Supplied WS #1 Quantity Demanded & Supplied WS #2 (Do worksheets in class and finish for AssignmentClass 8 Sample S & D Question (Ex) Study for Quiz The Market System Chapter 3 & 4 Verbal Quiz McConnell (Ch 20): pp. 356-364 Elasticity Characteristics Finish research Questions #3 AssignmentClass 9 Elasticity McConnell (Ch 20): pp. 364-367 What is Price Elasticity Finish Exercises of Demand (Ex) Elasticity of Demand (Ex) Receive Research Questions #4 Hand in Research Questions #3 AssignmentClass 10 More about Elasticity McConnell (Ch 20): pp. 367-369 Go Over Questions AssignmentClass 11 Elasticity and Graphs (Ex) McConnell (Ch 3): pp. 52-55 Economic Time Periods Price Controls Handout Price Elasticity of Supply Finish PS #1 question #2Income and Cross Elasticities 2nd & 3rd WeekChapters 3 & 4 pages 22-40 The purpose of this section is to identify and explain the importance of markets and the role played by demand and supply. The roles played by consumers, producers and the government in different market structures are highlighted. The failures of a market system are identified and possible solutions are examined. The concepts learned here have links with other areas of the economics syllabus; for example, elasticity has many applications in different areas of international trade and development. Objectives and Specific Topics and questions to be covered. 1. Concept of demand and the factors that shift the demand schedule 2. Concept of supply and the factors that shift the supply schedule 3. Demand and supply together to determine equilibrium price and quantity 4. A variety of results given different elasticities of demand and supply curves Individual Markets Demand and Supply (Chapter 3)• Definition of markets with relevant local, national and international examples• Brief descriptions of perfect competition, monopoly and oligopoly as different types ofmarket structures, and monopolistic competition, using the characteristics of the numberof buyers and sellers, type of product and barriers to entry• Importance of price as a signal and as an incentive in terms of resource allocationDemand• Definition of demand• Law of demand with diagrammatic analysis• Determinants of demand• Fundamental distinction between a movement along a demand curve and a shiftof the demand curve Higher level extension topic• Exceptions to the law of demand (the upward-sloping demand curve)• ostentatious (Veblen) goods• role of expectations• Giffen goods Supply• Definition of supply |
