EAST RIVER HIGH SCHOOL AP MACROECONOICS SUMMER READING ASSIGNMENTS

**These assignments will not be due until the first day of class. Since this is a second semester class, all assignments are due on the first or second day of class in January, 2010. This college-level course is a challenging course that is meant to be the equivalent of a freshman college course and can earn students college credit. Solid reading and writing skills, along with a willingness to devote time to homework and study, are necessary to succeed. I am asking that you complete the three summer assignments to help prepare you for the class. These assignments will help you to begin to understand the principles of macroeconomics and give you the background knowledge you will need to begin the course. This class will have less time than the first semester because AP exams are in early May. If you want to have a successful exam, it is imperative that these assignments be done before class begins or you will be behind when we begin. Remember, you choose to be in this class and your success will depend upon your willingness’s to prepare for it.

Summer Assignments for AP Macroeconomics:

1. REQUIRED: MUST HAVE FOR CLASS • • •

Barron's How to Prepare for the AP Microeconomics/Macroeconomics Advanced Placement Examination, Third Edition, by Frank Musgrave and Ella Kacapyr. There are other editions including a 4th edition, but you NEED TO GET THE THIRD EDITION. (cover is green and white). Read chapters 2, 3, and 4. Know the key concepts. Be prepared for a quiz on the first day.

2. Go the website: http://www.reffonomics.com/TRB/INPROGRESS/index12.html • Read the Basic Concepts category and answer the following questions. Be sure to use the 2nd Edition 2004-2009 on the left side of the page. • Complete the attached worksheet. Run it off and turn it in the first day. • This assignment will be due on the FIRST day of class in January, January 25th. • Be prepared for a quiz/test the first two days of class on the material covered from this worksheet.

3. Make Flash Cards • Use 3 X 5 index cards • Use black or blue pen only, no pencil • Put the term on the blank side of the card and write the definition on the lined side • This assignment is due the SECOND day of class in January, January 26th. • Be prepared for a test on the terms the first week of class. **NO EXCUSE WILL BE ACCEPTED FOR INCOMPLETE WORK. PLEASE CONTACT ME IF YOU HAVE ANY QUESTIONS. MY EMAIL IS [email protected] or [email protected]

Introduction to Economics Read: • •

What is economics? Opportunity cost

1. What is the difference between a good and a service?

2. What is the definition of economics?

3. What does it mean if something is scarce?

4. What are the four categories of resources?

5. What is opportunity cost?

6. What is a trade-off?

7. What is opportunity cost?

**TAKE THE MULTIPLE CHOICE QUIZ FOR INTRODUCTION TO ECONOMICS. Number of correct answers ______________ out of 10 questions. ---------------------------------------------------------------------------------------------------------------------------------------

Production Possibilities Curve/Frontier Unit Read: • • • • • •

Production possibilities curve I Production possibilities curve II Production possibilities curve III Production possibilities curve IV Production possibilities curve Interactive I Production possibilities curve Interactive II

1. What is a production possibility curve? What does it show?

2. What is someone or a country is producing inside their production possibility frontier, what does that mean?

3. What if there is a point on the outside of production possibility frontier, what does that mean?

4. What would allow a country to reach a point on the outside of their production possibility frontier curve? 5. A constant cost production possibilities frontier has what type of curve?

6. What does a straight production possibility curve mean?

7. What does it mean a country has an absolute advantage in production?

8. What is the definition of comparative advantage?

***TAKE THE MULTIPLE CHOICE QUIZ FOR PRODUCTION POSSIBILITIES CURVE. Number of correct answers ______________out of 25 questions. ---------------------------------------------------------------------------------------------------------------------------------------

Circular Flow Unit Read: • Circular Flow • Circular Flow Interactive 1. Draw a circular flow diagram with households and firms that include product and resource market. Be sure to explain what is flowing from the households and firms. COLOR CODE YOUR DIAGRAM.

**TAKE THE MULTIPLE CHOICE QUIZ FOR CIRCULAR FLOW DIAGRAM. Number of correct answers _______________ out of 15 questions. ---------------------------------------------------------------------------------------------------------------------------------------

Supply and Demand Unit Read: • • • • • • •

Quantity Demand and Demand Quantity Supplied and Supply Law of Demand Law of Supply Interactive Demand Chart Interactive Supply Chart Interactive Demand and Supply Buttons

1. The law of demand states that if price goes up, what happens to demand? 2. If price goes down, what happens to demand?

3. What are on the vertical and horizontal axes on a demand curve? 4. A change in price changes what and does not change what? 5. What is a demand curve? 6. How does a supply curve slope? 7. With supply, if price goes up, what happens to supply? If price goes down, what happens to supply? 8. Define: Quantity demanded: Demand: 9. What is the equilibrium price? 10. An increase in demand will shift the curve which direction? An decrease in demand will shift the curve which direction? 11. List and explain the determinants of demand: (EIGHT OF THEM)

12. Define: Quantity supplied: Supply: 13. List and explain the determinants of supply: (FIVE OF THEM)

AP MACROECONOMICS FLASH CARDS Scarcity Economics Equity Opportunity cost Marginal changes Incentive The four factors of production are: Capital Market failure Externality Market power Productivity Inflation Business cycle Circular flow diagram Production possibilities frontier

Two ways to increase PPC Unattainable points on the PPC Unattainable points on the PPC Efficient points on the PPC Inefficient points on the PPC Microeconomics Macroeconomics Positive statements Normative statements Absolute advantage Opportunity cost Comparative advantage Imports Exports Consumption Investment Government purchases Net exports capital Investment "Invisible hand"

The limited nature of society’s resources The study of how society manages its scarce resources The property of distributing economic prosperity fairly among the members of society Whatever must be given up to obtain some item Small incremental adjustments to a plan of action Something that induces a person to act Land labor capital and entrepreneur All manufactured aids used in producing consumer goods and services A situation in which a market left on its own fails to allocate resources efficiently The impact of one person’s actions on the well being of a bystander The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices The quantity of goods and services produced from each hour of a worker’s time An increase in the overall level of prices in the economy Fluctuations in economic activity such as employment and production A visual model of the economy that shows how dollars flow through markets among households and firms A graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

1.) increase resources 2.) increase technology - get more out of existing resources Inside or on the curve Outside of the curve On the curve Inside the curve The study of how households and firms make decisions and how they interact in markets The study of economy wide phenomenon, including inflation, unemployment, and economic growth Claims that attempt to describe the world as it is Claims that attempt to prescribe how the world should be The ability to produce a good using fewer inputs than another producer Whatever must be given up to obtain some item? The ability to produce a good at a lower opportunity cost than another producer Goods produced abroad and sold domestically Goods produced domestically and sold abroad Spending by households on goods and services, with the exception of purchases of new housing Spending on capital equipment, inventories and structures, including house hold purchases of new housing Spending on goods and services by local, state, and federal governments Spending on domestically produced goods by foreigners (exports) minus spending on foreign foods by domestic residents (imports) (capitol goods) all manufactured aids used in producing consumer goods and services (factory, storage, transportation, and distribution facilities, tools and machinery. Purchase of capital goods The theory of Adam Smith that firms and resource suppliers, seeking to further their own self-interest and operating within the framework of a highly competitive market system, will simultaneously promote the public

Law of demand Determinants of demand

Normal goods Inferior goods Law of supply Determinants of supply

equilibrium price surplus shortage price ceiling price floor

Theory that all else equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls (inverse relationship) Factors that can and do affect purchases: (1) consumers tastes/preferences, (2) the number of buyers in the market, (3)consumers incomes, (4)the prices of related goods, and (5)consumer expectations Products whose demand varies directly with money income (aka superior goods) Goods whose demand varies with inversely with money income As price rises, the quantity supplied rises; as price falls, the quantity supplied falls (direct relationship) (1) resource prices, (2) technology, (3) taxes and subsidies, (4) prices of other goods, (5) producer expectations, and (6) the number of sellers in the market. (Market-clearing price) price where the intentions of buyers and sellers match (quantity demanded meets quantity supplied) Excess supply - causes prices to fall Excess demand (causes prices to rise) Maximum legal price a seller may charge for a product or service Minimum price fixed by the government.