Mr. Medico Social Studies Department Paul D. Schreiber High School 1
Table of Contents Abstract & Rationale 3 Objectives & Standards 4 Content.8 Macroeconomics 8 Microeconomics 10 Assessment...12 Course Materials...13 Recommended Resources.. 14 Assignments...15 Tentative Unit Calendar.19 Calvin and Hobbes by Bill Watterson 2
Abstract: The yearlong Advanced Placement Economics program offers two separate courses in economics: one in macroeconomics and one in microeconomics. Each course presumes one semester of college-level preparation. In addition to providing college credit, the AP Economics program will prepare you for college by providing two academically rigorous semester courses. This program identifies and attracts academically superior students and increases enrollment in advanced classes. Participation in the AP Economics program also increases your motivation, self-confidence, and academic orientation. The purpose of this guide is to serve as a model or a recipe for a successful course in Advanced Placement Economics. This curriculum guide provides an overview of the objectives, state and national learning standards, content area, course materials, assessment, assignments, and unit calendar. Calvin and Hobbes by Bill Watterson 3
Objectives: The purpose of a course in Advanced Placement Macroeconomics is to give students a thorough understanding of the principles that apply to an economic system as a whole. The purpose of a course in Advanced Placement Microeconomics is to provide students a thorough understanding of the principles that apply to the individual units of an economic system. The National Council on Economic Education outlined the principles of economics in 1983. These six principles behind economic reasoning are sometimes referred to as The Handy Dandy Guide. You will apply these principles to your journey in economic literacy. 1. People economize 2. All choices involve cost 3. People respond to incentives 4. Economic systems influence individual choices 5. Voluntary trade creates wealth 6. The consequences of choices lie in the future In 1996 the National Council on Economic Education listed a total of nine principles of economic reasoning which include several variations of the original six principles. 1. Everything has a cost 2. People choose for good reasons 3. Incentives matter 4. People create economic systems to influence choices and incentives 5. People gain from voluntary trade 6. Economic thinking is marginal thinking 7. The price of a good or service is affected by people s choices 8. Economic actions create secondary effects 9. The test of a theory is its ability to predict The Advanced Economics Program will use these principles to meet and exceed the National and New York State Learning Standards for economic education. 4
Standard 1: Scarcity Students will understand that productive resources are limited. Therefore, people can not have all the goods and services they want; as a result, they must choose some things and give up others. Standard 2: Marginal Cost/Benefit Effective decision-making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something: few choices are all or nothing decisions. Standard 3: Allocation of Goods and Services Different methods can be used to allocate goods and services. People acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services. Standard 4: Role of Incentives People respond predictably to positive and negative incentives. Standard 5: Gain from Trade Voluntary exchange occurs only when all participating parties expect to gain. This is true for trade among individuals or organizations within a nation, and among individuals or organizations in different nations. Standard 6: Specialization and Trade When individuals, regions, and nations specialize in what they can produce at the lowest cost and then trade with others, both production and consumption increase. Standard 7: Markets-Price and Quantity Determination Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services. Standard 8: Role of Price in Market System Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives. Standard 9: Role of Competition Competition among sellers lowers costs and prices, and encourages producers to produce more of what consumers are willing and able to buy. Competition among buyers increases prices and allocates goods and services to those who are willing and able to pay the most for them. Standard 10: Role of Economic Institutions Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property right, is essential to a market economy. 5
Standard 11: Role of Money Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services. Standard 12: Role of Interest Rates Interest rates, adjusted for inflation, rise and fall to balance the amount saved with the amount borrowed, which affects the allocation of scarce resources between present and future uses. Standard 13: Role of Resources in Determining Income Income for most people is determined by the market value of the productive resources they sell. What workers earn depends, primarily, on the market value of what they produce and how productive they are. Standard 14: Profit and the Entrepreneur Entrepreneurs are people who take the risks of organizing productive resources to make goods and services. Profit is an important incentive that leads entrepreneurs to accept the risks of business failures. Standard 15: Growth Investment in factories, machinery, new technology, and in the health, education, and training of people can raise future standards of living. Standard 16: Role of Government There is an economic role for government in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income. Standard 17: Using Cost/Benefit Analysis to Evaluate Government Programs Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued. Standard 18: Macroeconomy-Income/Employment, Prices A nation s overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies, and others in the economy. Standard 19: Unemployment and Inflation Unemployment imposes costs on individuals and nations. Unexpected inflation imposes costs on many people and benefits some others because it arbitrarily redistributes purchasing power. Inflation can reduce the rate of growth of national 6
living standards because individuals and organizations use resources to protect themselves against the uncertainty of future prices. Standard 20: Monetary and Fiscal Policy Federal government budgetary policy and the Federal Reserve System s monetary policy influences the overall levels of employment, output, and prices. *Note* The above National Standards have been incorporated by the New York State Education Department as voluntary standards Economics is New York State Social Studies Learning Standard 4. 7
Content: Fall Semester Macroeconomics This is a summary outline of the major content areas covered by the AP exam. The percentages represent the approximate percentage devoted to that particular area on the multiple-choice portion of the exam. This is basically the outline that can be found in College Board publications. Unit 1 Basic Economic Concepts.. (8-12%) a. Scarcity, choice, and opportunity costs b. Production possibilities curve c. Comparative advantage, specialization, and exchange d. Demand, supply, and market equilibrium e. Macroeconomic issues: business cycle, unemployment, inflation, growth Unit 2 Measurement of Economic Performance...(12-16%) a. National income accounts i. Circular flow ii. Gross domestic product iii. Components of GDP iv. Real GDP versus nominal GDP b. Inflation measurement and adjustment i. Price indices ii. Nominal and real values iii. Costs of inflation c. Unemployment i. Definition and measurement ii. Types of unemployment iii. Natural rate of unemployment Unit 3 National Income and Price Determination..(10-15%) a. Aggregate demand i. Determinants of aggregate demand ii. Multiplier and crowding out effects b. Aggregate supply i. Short-run and long-run analysis ii. Sticky versus flexible wages and prices iii. Determinants of aggregate supply c. Macroeconomic equilibrium i. Real output and price level ii. Short and long run iii. Actual versus full-employment output 8
iv. Economic fluctuations Unit 4 Financial Sector....(15-20%) a. Money, banking, and financial markets i. Definition of financial assets: money, stocks, bonds ii. Time value of money (present and future value) iii. Measures of money supply iv. Banks and creation of money v. Money demand vi. Money market vii. Loanable funds market b. Central bank and control of the money supply i. Tools of central bank policy ii. Quantity theory of money iii. Real versus nominal interest rates Unit 5 Inflation, Unemployment, and Stabilization Policies (20-30%) a. Fiscal and monetary policies i. Demand-side effects ii. Supply-side effects iii. Policy mix iv. Government deficits and debt b. Inflation and unemployment i. Types of inflation - Demand-pull inflation - Cost-push inflation ii. Phillips curve short run versus long run iii. Role of expectations Unit 6 Economic Growth and Productivity. (5-10%) a. Investment in human capital b. Investment in physical capital c. Research and development, and technological progress d. Growth policy Unit 7 Open Economy: International Trade and Finance...(10-15%) a. Balance of payments accounts i. Balance of trade ii. Current account iii. Capital account b. Foreign exchange market i. Demand for and supply of foreign exchange ii. Exchange rate determination iii. Currency appreciation and depreciation c. Net exports and capital flows d. Links to financial and goods markets 9
Spring Semester Microeconomics: This is a summary outline of the major concepts covered by the AP Microeconomics exam. Note that Unit 1 Basic Economic Concepts are very similar in both the Macroeconomics and Microeconomics portions of the program. A brief review of Unit 1 will be given during the beginning of the Spring Semester. The most concentrated section of Microeconomics will begin with Unit 2 The Nature and Functions of Product Markets, which will review and extend the analysis of supply and demand. Unit 1 Basic Economic Concepts..(8-14%) a. Review of Scarcity, choice, and opportunity cost b. Review of Production possibilities curve c. Review of Comparative advantage, specialization, and trade d. Economic systems e. Property rights and the role of incentives f. Marginal analysis Unit 2 The Nature and Functions of Product Markets.....(50-70%) a. Supply and demand (15-20%) i. Market equilibrium ii. Determinants of supply and demand iii. Price and quantity controls iv. Elasticity - Price, income, and cross-price elasticities of demand - Price elasticity of supply v. Consumer surplus vi. Tax incidence and deadweight loss b. Theory of consumer choice (5-10%) i. Total utility and marginal utility ii. Utility maximization: equalizing marginal utility per dollar iii. Individual and market demand curves iv. Income and substitution effects c. Production and costs (10-15%) i. Production functions: short and long run ii. Marginal product and diminishing returns iii. Short-run costs iv. Long-run costs and economies of scale v. Cost minimizing input combination d. Firm behavior and market structure (25-35%) i. Profit - Accounting versus economic profits - Normal profit 10
- Profit maximization: MR=MC rule ii. Perfect competition - Profit maximization - Short-run supply and shutdown decision - Behavior of firms and markets in the short run and long run - Efficiency and perfect competition iii. Monopoly - Sources of market power - Profit maximization - Inefficiency of monopoly - Price discrimination iv. Oligopoly - Interdependence, collusion, and cartels - Game theory and strategic behavior v. Monopolistic competition - Product differentiation and role of advertising - Profit maximization - Short-run and long-run equilibrium - Excess capacity and inefficiency Unit 3 Factor Markets.(10-18%) a. Derived factor demand b. Marginal revenue product c. Labor market and firms hiring of labor d. Market distribution of income Unit 4 Market failure and the role of government....(12-18%) a. Externalities i. Marginal social benefit and marginal social cost ii. Positive externalities iii. Negative externalities iv. Remedies b. Public Goods i. Public versus private goods ii. Provision of public goods c. Public policy to promote competition i. Antitrust policy ii. Regulation c. Income distribution i. Equity ii. Sources of income equality 11
Assessment: Your grades can be viewed online at www.engrade.com Class Participation Class participation is vital to the success of any AP Economics program. Students must arrive to class ready to interact with each other in simulation activities and active discussions. Class participation also includes working on assignments, note taking, and listening. The use of smartphones, tablets, or any electronic device will drastically lower your grade. This includes having any device on your desk. Classroom Discussion Discussing the principles of economics is the best way to learn the material. Students also evaluated through verbal responses to questions asked by the teacher and their peers. There is such a thing as too much participation. If you monopolize classroom discussion, your grade will be lowered. Homework Students are required to do the textbook reading prior to the class. Students will also demonstrate a written understanding of the reading by completing any homework questions assigned. Homework is given every night and completed before the class meets. Tests/Quizzes All tests are based on the format of the AP exams. All Part II graphs and responses are to be completed in ink on lined paper just like on the AP exam. Part I and Part II questions are modeled after AP questions. Short wrap-up quizzes that serve as a summative assessment are also helpful tools. If you miss an exam, you must make it up immediately. Tests are not returned until every student completes the exam. Sample Quarterly Grade Distribution Tests 60% Quizzes 20% Assignments 20% 12
Course Materials: College-ruled notebook/binder (no graph paper) Pen (blue or black ink only), pencil, and calculator for in-class examples. Textbook Anderson, David and Margaret Ray. Krugman s Economics for AP Second Edition. New York: BFW/Worth Publishers, 2015. Videos 200 Countries in 200 Years A Beautiful Mind Economics U$A Enron: The Smartest Guys in the Room The Fed Today The Hudsucker Proxy I Love Lucy Inside Job Is Wal-Mart Good for America? The Other Side of Outsourcing The Stand-Up Economist Key Websites for Economic Statistics Bureau of Economic Analysis (GDP, National Income) www.bea.gov Bureau of Labor Statistics (Unemployment, Inflation) www.bls.gov Federal Reserve Economic Data (FRED) St. Louis Fed www.research.stlouisfed.org/fred2 Websites for Studying and Exam Review Mr. Medico s No Bull Economics Lessons www.mrmedico.info / www.nobulleconomics.com Mr. Medico s YouTube Channel www.youtibe.com/medicotube College Board/AP Central (Old Exam Questions) www.apcentral.collegeboard.com Economics Blogs Café Hayek (www.cafehayek.com) Dan Ariely (www.danariely.com) Econ Browser (www.econbrowser.com) Freakonomics (www.freakonomics.com/blog) Greg Mankiw (www.gregmankiw.blogspot.com) Marginal Revolution (www.marginalrevolution.com) 13
Recommended Resources: Books for Pleasure Ariely, Dan. Predictably Irrational. 2008. Bauman, Yoram and Grady Klein. The Cartoon Introduction to Economics: Volume 1: Microeconomics. Hill and Wang, 2010. Bauman, Yoram and Grady Klein. The Cartoon Introduction to Economics: Volume 2: Macroeconomics. Hill and Wang, 2011. Buchholz, Todd. From Here to Economy: A Shortcut to Economic Literacy. Plume, 1996. Buchholz, Todd. New Ideas from Dead Economists: An Introduction to Modern Economic Thought. Plume, 1999. Cowen, Tyler. Discover Your Inner Economist. 2007. Frank, Robert H. The Economic Naturalist. 2007. Hazlitt, Henry. Economics in One Lesson. Three Rivers Press, 1988 Edition. Heilbronner, Robert. The Worldly Philosophers 7 th Rev. Ed. Touchstone, 1999. Landsburg, Steven. The Armchair Economist: Economics and Everyday Experience. Free Press, 1995. Levitt, Steven D. and Stephen J. Dubner. Freakonomics: A Rogue Economist Explores the Hidden Side to Everything. Morrow, 2005. Review Books/Materials No Bull Review for Use with the AP Macroeconomics and AP Microeconomics Exams by Mr. Medico, Barron s, Princeton Review, Kaplan, and 5 Steps to a 5. Apps: There are also review apps for smart phones including my review apps, Economics AP from StudyByApp for the iphone, ipad, and ipod Touch; features practice questions, unit review lectures, diagrams, and notes. 14
Course Assignments: Quarter 1: Macroeconomics #1 Register Engrade account; Read Module 1; p.8 1-4, p.9 1-5 MC Watch 1.1 Scarcity; Analyze Bastiat s Broken Window #2 Read Module 3; p.22 1 & 1-5 MC Watch 1.2 Production Possibilities; WS PPC #3 Read Module 4; p.30-31 1-2 & 1-5 MC Watch 1.3 Comparative Advantage and Trade; WS Nick-Jessica, FRQ #4 Quick Quiz Introductory Concepts Watch 1.4 Circular Flow; WS Circular Flow #5 Read Modules 5-8; p.58 1, p.67 1-2, p.78 1-3, p.89 1-3, p.100-01 1-13 MC Watch 1.5 Supply and Demand, 1.6 Shifting Supply and Demand, 1.7 Price Ceilings, 1.8 Price Floors; Wheat Market Simulation; WS Grebes #6 Exam 1: Basic Economic Concepts (NB1) Watch Top 10 Basic Economic Concepts to Know (or listen to mp3 with Top Ten Guide) #7 Read Modules 2, 10-11; p.15 1-5 MC, p.114 1-5 MC, p.119 1-2 & 1-5 MC Watch 2.2 GDP, 2.3 Excluded GDP, 2.4 Real vs. Nominal GDP; WS GDP #8 Quick Quiz 1: GDP #9 Read Modules 12-13; p.127 1-3, p.137 1-5 MC Watch 2.5 Types of Unemployment, 2.6 Unemployment Rate #10 Read Modules 14-15; p.144 1-2 & 1-5 MC, p.152 1-5 MC Watch 2.7 Inflation Overview; WS Inflation, WS Review Questions #11 Exam 2: Macroeconomic Performance (NB2) Watch Top 10 Macroeconomic Performance Concepts to Know (or listen to mp3) #12 Read Modules 17-19; p.178 1 & 1-5 MC, p.190 1 & 1-5 MC, p.199 1-2 & 1-5 MC WS AD/AS #13 Read Module 16; p.170 1-2 & 1-5 MC WS Spending Multiplier Quarter 2: Macroeconomics #14 Quick Quiz 2: AD/AS Graphing #15 Read Modules 20-21; p.209 1 & 1-5 MC, p.216 1 & 1-5 MC 15
Watch 3.1 Exp. Fiscal Policy, 3.2 Contr. Fiscal Policy; WS Fiscal Policy #17 Exam 3: AD/AS & Fiscal Policy (NB3) Watch Top 10 AD/AS & Fiscal Policy Concepts to Know (or listen to mp3) #18 Read Modules 22-24; p.231 1-5 MC, p.237 1 & 1-5 MC, p.243 1-5 MC Watch The Fed Today; WS Money #19 Read Module 25; p.252 3 & 1-5 MC WS Multiple Expansion of Checkable Deposits #20 Read Module 26-28; p.260 1-5 MC, p.266 1-5 MC, p.274 1-5 MC WS Tools of Monetary Policy #21 Quick Quiz 3: Monetary Policy #22 Read Module 35; Monetary Policy Project FRED Research; Creative Presentation #23 Exam 4: Money, Banking, & Monetary Policy (NB4) Watch Top 10 Banking & Monetary Policy Concepts to Know (or listen to mp3) #24 Read Modules 29, 34-35; p.285-286 1 & 1-5 MC, p.339 1 & 1-5 MC, p.351-352 1-5 MC Watch EconStories; WS Phillips Curve #25 Big Quiz 1: Theories, Policies, & Growth (NB5) Watch Top 10 Theories, Policies, and Growth Concepts to Know (or listen to mp3) #26 Read Module 41; p.415 1 & 1-5 MC WS Current & Capital Account #27 Read Modules 42 & 44; p.425 1 & 1-5 MC, p.442 1-5 MC WS Foreign Exchange Markets #28 Big Quiz 2: International Sector (NB6) Watch Top 10 International Economic Concepts to Know (or listen to mp3) #29 Macroeconomics Practice Exam #30 Final Exam: Macroeconomics (NB1-6) Watch Top 10 AP Macroeconomics Exam Concepts to Know Quarter 3: Microeconomics #1 Read Modules 51 & 50; p.524 1-5 MC & p.525 1 FRQ, p.512-513 2 & 1-5 MC Watch 2.1 Consumer Surplus, 2.2 Producer Surplus; WS Diminishing Marginal Utility 16
#2 Read Modules 46-48; p.465 1-5 MC, p.475 1-2 & 1-5 MC, p.483 1-5 MC WS Elasticities #3 Exam 1: Basic Economic Concepts+ (NB1 & NB7) Watch Top 10 Utility & Elasticity Concepts to Know (or listen to mp3) #4 Read Modules 52-55; p.543 1 & 1-5 MC, p.550 1-5 MC, p.562 1-5 MC, p.570 1-5 MC Watch Top 10 Costs of Production Concepts to Know; WS MP-AP & Production Costs #5 Read Modules 57-59; p.581 1, p.593 1-5 MC, p.601 1-5 MC Watch 4.2 PC Economic Profit, 4.3 PC Economic Loss; WS Perfect Competition #6 Read Module 60; p.612-613 1 & 1-5 MC WS Graphing Perfect Competition in Short Run & Long Run #7 Read Modules 61-63; p.622 1-5 MC, p.628 1-5 MC, p.635 1-5 MC; p.639 1-25 Watch 4.5 Elasticity & Marginal Revenue, 4.6 Mon. Profit, 4.7 Mon. Loss, 4.8 Mon. Deadweight Loss, 4.9 Mon. Consumer Surplus; WS Monopoly #8 Quick Quiz 1: Graphing Perfect Competition & Monopoly WS PC-Monopoly #9 Read Module 67; p.674 1-5 MC Watch 4.10, 4.11, 4.12 Monopolistic Competition; WS Monopolistic Competition #10 Read Module 64-65; p.656 1 & 1-5 MC Watch 4.15 Game Theory; WS Game Theory #11 Exam 2: Product Markets (NB8 & NB9) Watch 4.1 PC Overview, 4.4 Monopolies, 4.13 Per-Unit vs. Lump-Sum, 4.14 Oligopoly #12 Read Modules 69-71; p.697 1-2 & 1-5 MC, p.704 1-5 MC, p.714 2 FRQ Watch 5.1 Perfectly Competitive Labor Market; WS Derived Demand #13 Read Module 72; p.718 1 & 1-5 MC #14 Read Module 73; p.726 1-5 MC #15 Exam 3: Factor Markets (NB10) Watch Top 10 Factor Market Concepts to Know (or listen to mp3) #16 Read Module 76; p.761 1-2 & 1-5 MC #17 Read Modules 74-75, 78; p.750 2 & 1-5 MC, p.782 1-5 MC Watch 6.1 Pos. Ext., 6.2 Neg. Ext., & 6.3 Per-Unit Taxes; WS Externalities 17
#18 Big Quiz 1: The Government (NB11) Watch Top 10 Role of Government Concepts to Know (or listen to mp3) Quarter 4: Microeconomics & AP Exam Review #20 Practice Microeconomics Exams (2005-2015) #21 Microeconomics FRQs (2011-2015) #22 Final Exam: Microeconomics (NB1 & NB7-11) #25 Practice Macroeconomics Exams (2005-2015) #26 Macroeconomics FRQs (2011-2015) #27 More Practice Exams Prepare for the AP Economics exams by reviewing reviewing both No Bull Review books; using the audio-video resources on http://mrmedico.info; watching videos on http://youtube.com/user/medicotube, doing the MC questions from old AP exams, and completing practice FRQs on AP Central. If you have any questions, please email me at cmedico@gmail.com You can also text me at (516) 900-ECON [3266] Find me on Twitter @MrMedicoInfo Follow my Instagram @MrMedico Good luck! 18
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