The Course
The purpose of an AP course in macroeconomics is to give students a thorough understanding of the principles of economics that apply to an economic system as a whole. This course will place a particular emphasis on the study of national income and price-level determination, and also develops students' familiarity with economic performance measures, the financial sector, stabilization policies, economic growth, and international economics.
Topics/ Curriculum Outline
- Basic Economic Concepts
A macroeconomics course introduces students to fundamental economic concepts such as scarcity and opportunity costs. Students understand the distinction between absolute and comparative advantage and apply the principle of comparative advantage to determine the basis on which mutually advantageous trade can take place between individuals and/or countries and to identify comparative advantage from differences in opportunity costs.
- Measurement of Economic Performance
To provide an overview of how the economy works, the course should start with a model of the circular flow of income and products that contain the four sectors: households, businesses, government, and international. The course should examine the nature and causes of unemployment, the costs of unemployment, and how the unemployment rate is measured, including the criticisms associated with the measurement of the unemployment rate.
- National Income and Price Determination
This section introduces the aggregate supply and aggregate demand model to explain the determination of equilibrium national output and the general price level, as well as to analyze and evaluate the effects of public policy.
- Financial Sector
To understand how monetary policy works, students must understand the definitions of both the money supply and money demand and the factors that affect each of them. Here the course introduces students to the definition of money and other financial assets such as bonds and stocks, the time value of money, measures of the money supply, fractional reserve banking, and the Federal Reserve System.
- Inflation, Unemployment, and Stabilization Policies
Public policy affects the economy's output, price level, and level of employment, both in the short run and in the long run. Students should learn to analyze the impacts of fiscal policy and monetary policy on aggregate demand and on aggregate supply as well as on the economy's output and price level both in the short run and in the long run. It is also important to understand how an economy responds to a short-run shock and adjusts to long-run equilibrium in the absence of any public policy actions.
- Economic Growth and Productivity
The course should introduce the framework and examine how long-run economic growth occurs. Students should understand the role of productivity in raising real output and the standard of living, and the role of investment in human capital formation and physical capital accumulation, research and development, and technical progress in raising productivity.
- Open Economy: International Trade and Finance
An open economy interacts with the rest of the world both through the goods market and the financial markets, and it is important to understand how a country's transactions with the rest of the world are recorded in the balance of payments accounts. Students should understand the meaning of trade balance, the distinction between the current account balance and the capital account balance, and the implications for the foreign exchange market. The course should also focus on the foreign exchange market and examine how the equilibrium exchange rate is determined. Students should understand how market forces and public policy affect currency demand and currency supply in the foreign exchange markets and lead to currency appreciation or depreciation.
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* Denotes college credit granted via the St. John's College Extension Program.
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