AP Macroeconomics Syllabus Introduction AP Macroeconomics emphasizes economics principles as applied to the economy as a whole. AP Macroeconomics is a course to qualify secondary school students who wish to complete coursework equivalent to a one-semester college introductory class. Each student is expected to take the AP Macroeconomics Exam that will be administered in May. Basically the AP exam determines whether a student understands enough of the subject area matter to be given three (3) college credits. The following syllabus has being built according to the Course Description defined by the College Board. Texts  

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Required Text: McConnell, Campbell R and Brue, Stanley R. ―Economics: Principles Problems and Policies”. 18th Edition. New York, NY: McGraw-Hill Irwin, 2009. Supplementary Text: There is no specific supplementary text, although we will work with extra excerpts from known macroeconomic authors such as Gregory Mankiw, Paul Krugman, Xavier Sala-i-Martín, Joseph Stiglitz, Paul Samuelson, etc. Articles from media will also be used to connect theoretical contents with current issues and debates on macroeconomic policy. Additional Textbooks  Musgrave, Frank, and Kacapyr, Elia. ―AP Microeconomics/Macroeconomics‖. 3rd ed. Barron’s, 2009.  Dodge, Eric R. ―5 steps to a 5, AP Microeconomics/Macroeconomics‖. McGraw- Hill, 2008-2009  Anderson, David. ―Cracking the AP Economics Macro & Micro Exams‖. The Princeton Review. 2010 Ed.

The course is planned for a length of 18 weeks.

Course Outline

Support text: McConnell and Brue, Economics 18th Ed, Chapters 1, 2 and 3 Section I: Basic Economic Concepts [CR1]

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CR1— the course provides instruction in basic economic concepts.

A. Scarcity: Explain why scarcity is at the core of economic thought. Discuss the theory of needs of Maslow and Alderfer as an explanation for unlimited needs versus limited resources. The factors of production as the inputs necessary to satisfy needs. B. Opportunity Cost and choice: Define and compute it. Why can it never be avoided? C. Production Possibilities: Construct and interpret production possibilities schedules, and graphs; relate production possibilities curves to the issues of scarcity, choice and opportunity cost. Why are most

AP Macroeconomics Syllabus PPCs bowed out? → Introduce the law of diminishing returns that implies increasing marginal cost of production. D. E. Functions of Any Economic System 1. How do different Economic Systems answer the questions: What to produce? How to produce? For whom to produce? 2. Compare different economics systems, and define ways societies determine allocation, efficiency, and equity. Section II: Demand, Supply, and Price Determination [CR3] CR3: The course provides instruction on national income and price determination.

A. Demand: Define and illustrate demand through schedules and graphs. 1. Examine the inverse relationship existing between quantity demanded and price. Evaluate the Law of Demand. Focus on diminishing marginal utility. 2. Distinguish between change(s) in quantity demanded and change(s) in demand. 3. Identify and explain the variables that cause a change in demand. 4. Illustrate graphically a change in demand versus a change in quantity demanded. [CR9] CR9: The course teaches how to generated, interpret, label, and analyze graphs, charts, and data to describe and explain economic concepts.

B. Supply: Define and illustrate supply through schedules and graphs. 1. Examine the direct relationship existing between quantity supplied and price. Evaluate the Law of Supply. 2. Identify and explain the variables that cause a change in supply. 3. Along the line or the line shifts? Illustrate graphically a change in supply versus a change in quantity supplied. C. Equilibrium Price and Quantity: Define and illustrate equilibrium through schedules and graphs. 1. Define and illustrate surpluses and shortages. 2. Define the effects of surpluses and shortages on prices and quantities. 3. Interpret the effects of a price floor and price ceiling on equilibrium price and quantity. 4. Introduction to market failures: lack of competition, externalities, and public goods. CR9: The course teaches how to generated, interpret, label, and analyze graphs, charts, and data to describe and explain economic concepts.

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Support text: McConnell and Brue, Economics 18th Ed, Chapters 4, 24 and 26 Section I: Outline of the U.S. economy: private and public sectors CR 2: The course provides instruction in measurements of economic performance.

AP Macroeconomics Syllabus

A. The Role of Households in the Economy 1. Households as income receivers: functional and personal distribution of income. 2. Households as spenders: The distributions of expenditures B. Private and Public Sectors 1. Business Population: Forms of businesses, the Principal-Agent problem. Functional distribution of income 2. Public Sector: The Role of the Government. The Circular Flow Revisited.

Section II: Gross Domestic Product and National Income Concepts [CR2] CR 2: The course provides instruction in measurements of economic performance.

A. Measuring GDP, Four-Sector Circular Flow Model, and Flow Versus Stock 1. Expenditure approach [C+I+G+(X-IM)] 2. Income approach (W+I+R+P) B. What the GDP does not include: Nonmarket transactions, distribution, kind and quality of products. Compare GDP with other indexes of economic performance such as HDI (Human a. Development Index) C. Changing Nominal GDP (NGDP) to real GDP (RGDP). How and why? D. Other national accounts: net national product (NNP), national income (NI), personal income (PI), and disposable income (DI). Section III: Business Cycles and Instability: Unemployment [CR5] CR 5 The course provides instruction in inflation, unemployment, and stabilization policies

A. B. C.

D. E.

Economic Growth: The Trend. Deviations from the Trend: Business Cycles. Phases and causation. Unemployment: 1. Definition and Measurement 2. Types: seasonal, frictional, structural, cyclical. Which affect the unemployment rate? Full Employment: What is it? What are the implications if achieved? The GDP Gap: Explaining lost potential and relate it to employment.

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Section IV: Inflation [CR5] A. B. C. D. E. F. G.

The meaning and measurement of Inflation The Consumer Price Index (CPI) and How It Is Computed Problems with the CPI Other indexes and what information they provide: Producer Price Index Consequences of Inflation: shrinking incomes, changes in wealth, effect on interest rates. Demand- Pull and Cost-Push Inflation Deflation: causes and consequences.

AP Macroeconomics Syllabus

Support text: McConnell and Brue, Economics 18th Ed, Chapters 27, 28, 29 and 30 Section I: Basic Macroeconomic Relationships and the Aggregate Expenditures Model CR3: The course provides instruction on national income and price determination.

A. B. C. D.

E. F. G. H.

Consumption and Savings. Analysis of the functions. Marginal Propensities to Consume and Save Savings and Investment. The role of the Interest Rate. Changes in the consumption function Changes in the Investment Demand 1. Expectations 2. Technological change 3. Capacity utilization 4. Investment as an Autonomous Expenditure The components of the Aggregate Expenditure. Graphing the Aggregate Expenditure Function. Equilibrium in the Aggregate Expenditures Model Government Spending and How It Affects Aggregate Demand: the Spending Multiplier

Section II: The Aggregate Demand and Aggregate Supply Model (AD-AS) CR3: The course provides instruction on national income and price determination

Aggregate Demand Curve: Reasons for Its Shape 1. Real balances effect 2. Interest rate effect 3. Net export effect B. Nonprice-Level Determinants of Aggregate demand. Reasons for shifts of Aggregate Demand C. Aggregate Supply Curve: Reasons for its shape 1. Classical View - Long term view 2. Keynesian View – Short term view D. Nonprice-Level Determinants of Aggregate Supply 1. Input prices: National Resources, Imported Resources and Market Power 2. Productivity 3. Legal Institutional Environment. E. Macroeconomic Equilibrium. AD-AS Equilibrium: Graphical Analysis. Changes in AD and AS and its effects on prices and output. F. The Relationship between the Aggregate Demand Curve and the Aggregate Expenditures Model.

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AP Macroeconomics Syllabus Section III: Fiscal Policy in the AD-AS Model Curricular Requirement 2 (CR 2) and Scoring Component 8 (SC8): The course promotes the critical evaluation of determinant of progress and economic decisions made by policymakers.

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C. D. E. F.

Expansionary Fiscal Policy 1. Increased Government Spending 2. Changes in tax rates 3. Tax Reductions Contractionary Fiscal Policy 1. Decreased Government Spending 2. Changes in tax rates 3. Tax Increasing Balanced-budget multiplier Built-in Stabilizers Crowding-Out Effect The burden of the deficit over future expenditure

Support text: McConnell and Brue, Economics 18th Ed, Chapters 31, 32 and 33 Section I: The Money Market CR 4- The course provides instruction in the Financial Sector.

A. B.

C. D. E. F.

Functions of Money Money Supply Definitions 1. M1: most narrowly defined money supply 2. M2: adding near monies to M1 3. M3: adding large time deposits to M2 What stands behind money? Demand for money The Money Market The Federal Reserve and the Banking System

Section II: Money and Banking A. B.

How banks create money The monetary multiplier

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Section III: Monetary Policy Curricular Requirement 2 (CR 2) and Scoring Component 8 (SC8): The course promotes the critical evaluation of determinant of progress and economic decisions made by policymakers.

AP Macroeconomics Syllabus

A. B.

C.

The Balance Sheet of Central Banks Tools of Monetary Policy. Connections with latest monetary Operations. 1. Open Market Operations: Buying and Selling Securities. 2. Changes in the Reserve Ratio 3. Changes in the Discount Rate 4. Debate on the relative importance of each tool 5. Debate on the different targets the Fed can have The effects of monetary policy in the aggregate economy: graph and analyze 1. Effects on real GDP and on the Price Level 2. Easy and tight monetary policy: Analysis of the recent years 3. Problems of monetary policy: lags, changes in velocity, cyclical asymmetry 4. Effects of monetary policy on the Trade Balance

Support text: McConnell and Brue, Economics 18th Ed, Chapters 35 and 36 Section I: The long run analysis Curricular Requirement 3 (CR3) and Scoring Component 9 (SC9): The course teaches how to generate, interpret, label, and analyze graphs, charts, and data to describe and explain economic concepts.

A. B.

From short term to long term. Prices and wages flexibility. The long run aggregate supply curve. The extended AD-AS model. Graph and analyze. 1. Demand-pull inflation. 2. Cost-push inflation. 3. Recession

Section II: The Inflation-Unemployment Relationship Curricular Requirement 1 (CR1) and Scoring Component 3 (SC3): The course provides instruction on inflation, unemployment and stabilization policies.

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The Phillips Curve and Expectation Theory 1. The short-run Phillips Curve 2. The long-run Phillips Curve 3. Stagflation B. Rational expectations Theory. Can it work? C. Taxation and Aggregate Supply 1. Supply-side economics 2. Support and Criticisms of the Laffer curve

AP Macroeconomics Syllabus Section III: The Macroeconomic Debate A.

Classical-Keynesian Differences 1. Different Explanations for recession 2. Mainstream Keynesian Theory 3. Monetarist View 4. Real Business-Cycle View 5. Coordination Failures B. The Self-Correction Hypothesis C. Intervention: Rules or Discretion Section IV: The Debate on the Government Budget A. Key terms: Deficit, Surplus, and Debt B. Public debt: The Data C. The Deficit Debate: Concerns and Macroeconomic Justifications. Curricular Requirement 2 (CR 2) and Scoring Component 8 (SC8): The course promotes the critical evaluation of determinant of progress and economic decisions made by policymakers.

Support text: McConnell and Brue, Economics 18th Ed, Chapters 37 and 38 Section I: International Trade A. International Trade Importance: Some Data B. Why trade? Comparative Advantages Analysis 1. Graphical Analysis 2. Gains from trade C. The Supply and Demand Model Analysis D. The Effect of Trade Barriers 1. Tariffs 2. Quotas E. Free Trade versus Protectionism. F. The WTO CR 7- The course provides instruction in open economy (international trade and finance).

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Section II: Balance of Payment, Trade deficits, and Exchange Rates A. The Balance of Payment Structure B. Trade Deficits and Surpluses

AP Macroeconomics Syllabus C. The Current Market 1. Flexible Exchange Rates i. Graphical analysis ii. Advantages and Disadvantages 2. Fixed Exchange of Rates i. Advantages and Disadvantages 3. History of International Exchange-Rate Systems. CR 4- The course provides instruction in the Financial Sector. CR 8- The course promotes the understanding of aggregate economic activity, the utilization of resources within and across countries, and the critical evaluation of determinants of economic progress and economic decisions made by policy makers.

CR3: The course provides instruction on national income and price determination

Support text: McConnell and Brue, Economics 18th Ed, Chapters 23, 25, and 39 Section I: Economic Growth A. Supply factors for Growth B. The importance of Demand and Efficiency C. Growth in the Production Possibilities Curve Model D. Growth in the long run AD-AS model E. Productivity as reflection of Growth Factors. What factors could increase productivity? 1. Technology 2. Capital 3. Education and Training – Human capital 4. Economies of scale and allocation F. Productivity changes in history G. Growth, development, and sustainability. CR6: The course provides instruction in economic growth and productivity

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Section II: Economics of Developing Countries A. A look at the Data. Rich, poor, and middle income countries. B. Obstacles for growth: the vicious circle of poverty C. The role of Government D. The role of development countries E. What can be done? 1. At the developed countries 2. From the developed countries. Curricular Requirement 1 (CR1) Economic growth and productivity and Scoring Component 6 (SC6): The course provides instruction in economic growth and productivity.

AP Macroeconomics Syllabus

Curricular Requirement 2 (CR2) and Scoring Component 8 (SC8): The course promotes the critical evaluation of determinant of progress and economic decisions made by policymakers.

Evaluation  Class work 35% / Presentations and working in groups are included.  Homework 25%  Quizzes 15%  Tests 25% Other evaluation thoughts:  Quizzes will take place every two weeks.  Exams will take place every 4 or 5 weeks.  Assignments will vary from basic worksheets to analytical papers. 

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Projects. Students will work in groups of five to complete an economics research project about significant topics. Each team will work on a specific economic theme, and then the group will complete a written article and prepare an oral presentation. Power Point Presentations, Posters, Graphs, Charts, Videos, etc. could be used to support their presentations in class. Students will demonstrate their understanding and achievement of the macroeconomics concepts by using and applying essential economics concepts in a project. Each team will responsible for writing a paper that explain, illustrate, and exemplify the correspondent concept assigned to the group. Also the team will include questions and dilemmas to promote discussion in relation to some of the alternative views. The use of a proper language and an appropriate data, where possible, will be also part of the project evaluation. The project evaluation come from all of the followings: o Writing Paper → 30% o Oral Presentation → 40% o Power Points, Graphs, application of Statistics Techniques, Charts, etc. for supporting concepts and presentation → 30%

Examples of Project /Discussion Topics:    

Inflationary Expectations and Macroeconomics Variables. The mortgage Debt Crisis: the FED Responds Speculation in Currency market International Trade: A critical review. Protection vs. Free Trade. Analysis of cases.

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CR9: The course teaches how to generated, interpret, label, and analyze graphs, charts, and data to describe and explain economic concepts.