|The purpose of an AP course in Macroeconomics is to give students a thorough understanding of the principles of economics that apply to the economic system as a whole. It places primary emphasis on the fundamental determinants of national income and price levels, and also includes the study of measures of economic performance, economic growth, and international trade. |
This portion of the AP Economics course will be divided into eight units.
***click on the unit titles to obtain unit lessons!***
|UNIT I: MEASUREMENTS OF ECONOMIC PERFORMANCE|
The "nuts and bolts" performance of any national economy is usually measured in terms of Gross National Product, Gross Domestic Product, and the levels of inflation and unemployment. This unit will cover the components of gross income measures and the costs of inflation and unemployment. Students will learn to distinguish between nominal and real values, and how to use price indices to convert nominal magnitudes into real magnitudes. As the course moves from static descriptions to dynamic models, we will discuss the actual levels of inflation, unemployment, GNP and GDP in the United States.
LESSON #1 introduces the big ideas in macroeconomics. Starting with an example close to students’ hearts – how the business cycle affects the job prospects of graduates, this lesson provides a quick overview of recessions and expansions, employment and unemployment, long-run growth, inflation versus deflation, and the open economy.
Lesson #2 explains how the numbers macroeconomists use are calculated, and why. We start with a real-world example of how an estimate of real GDP helped save a country from policy mistakes, then turn to the basics of national income accounting, unemployment statistics, and price indexes.
This unit will make up 8-12% of the AP Exam.
1. Define the study of Macroeconomics
In this unit, students will be exposed to the idea of long run productivity and how it is tied into out labor force. Concepts such as technology, job training and re-structuring are applied to graphical analysis within the PPF model, AD / AS model and the introduction of the Phillips Curve. We then look at the problem of unemployment in terms of its impact on growth, its origins and causes and the social costs to society as a result. Students will calculate the unemployment rate and Labor Participation Rate of nations, and derive the concept of "full employment" GDP, so as to identify output gaps within the economy.
Lesson #1 focuses on the measuring of unemployment as a problem studied by Macroeconomists. Students will learn the types of unemployment and their impact of society. They also will calculate the unemployment rate and Labor Participation Rate and be able to apply these concepts to a Phillips Curve graph and a PPF model.
Lesson #2 will concentrate on the interpretation of the graphs on a nation - the effects of long run productivity and how to represent it on a model.
This unit will make up 15-20% of the exam
Identify the three types of unemployment.
Define the Natural Rate of Unemployment
Graph the effects of unemployment on a Phillips Curve and on a PPF graph
Show the impact of unemployment on a AD/AS model
Explain sources of long run productivity and how it impacts economic graphs.
Calculate the rate of unemployment and the Labor Participation Rate.
The material in this unit is the heart of a Macroeconomics course. Since the material is complex, students will need a theoretical construct to organize the concepts; that construct will be the Aggregate Supply-Aggregate Demand model. The relevance of this analysis to fiscal policy decisions will be shown by identifying the goals and tools of fiscal policy and end by analyzing fiscal policy through the economic concepts developed in this unit.
Lesson #1 starts the students with an introduction to John Maynard Keynes and his revolution of modern economic theory of Keynesian Fiscal Policy used during the Great Depression. The course describes the tenants of fiscal policy and the introduction of government deficit spending and crowding out. Students will learn about automatic stabilization policies used to justify the use of fiscal policy. The concept of Keynesian policy on the demand-side will be applied to both an AD/AS graph and a Loanable Funds market graph.
Lesson #2 compares Keynesian demand-side policies to the use of "Supply-Side" fiscal policies, with the introduction of Say's Law. Students will apply the tenants of supply side fiscal policy to the AD/AS model. Students will also apply the two policies to the problems of inflation and economic growth.
This unit will make up 25-30% of the AP Exam.
1. Explain and show graphically how Fiscal Policy can be used to reduce and Inflationary or Recessionary Gap
|UNIT V: THE FED AND MONETARY POLICY|
An important step in analyzing Aggregate Demand is the study of the effect of Monetary Policy. The concepts in this unit include the definition of money, fractional reserve banking, and the Federal Reserve System. Students should learn how multiple deposit expansion affects the money supply and how the money supply affects the economy. From this, we can define the determinants of the demand for money and investigate how equilibrium in the money market determines interest rates, and how the investment demand curve provides the link between changes in the money market and changes in Aggregate Demand.
Lesson #1 covers the roles of money, how banks create money, and the structure and role of the Federal Reserve and other central banks. Students will learn the types and roles of money and what economists will constitute as the money supply. The money multiplier is then introduced.
Lesson #2 introduces “Monetary Policy,” and covers the role of Federal Reserve policy in driving interest rates and aggregate demand. In the real-world examples we took full advantage of the dramatic developments in monetary policy since 2000, which make it easier than ever before to illustrate what the Federal Reserve does. We also made a special effort to build a bridge between the short run and the long run. For example, we carefully explain how the Federal Reserve can set the interest rate in the short run, even though that rate reflects the supply and demand for savings in the long run. The Money Market Graph is introduced and applied to the AD/AS model.
This unit will make up 20-25% of the AP Exam.
1. Define and explain the functions of money
12. Compare and contrast the Keynesian and Monetarist views
The focus of this unit is world trade, the conduct of commerce among individuals, firms, and governments. This unit will cover concepts such as opportunity cost, comparative and absolute advantage, free trade, protectionism, the balance of payments, and exchange rates. It is important to examine why a country trades, what the effects of restrictions are, how the international payments system helps or hinders trade, and how international exchange rates affect domestic policy goals.
Lesson #1 “International Trade,” contains a recap of comparative advantage, traces the sources of comparative advantage, considers tariffs and quotas, and explores the politics of trade protection. In response to current events, we give in-depth coverage to the controversy over imports from low-wage countries.
Lesson #2 “Macroeconomic Policy in Open Economies,” analyzes the special issues raised for macroeconomics by the open economy. We frame the discussion with real-world concerns such as America’s current account deficit, and China’s accumulation of dollar reserves. Students learn the concept of Foreign Exchange Markets and how the value of currencies interact with interest rates and exchange rates. THe will be able to depict these changes in terms of graphing government international policies.
This unit will make up 15-20% of the AP Exam.
1. Define Comparative and Absolute Advantage