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  AP Guide: Microeconomics | Macroeconomics

  Guide to Commanding Heights Online for AP Instructors

  This guide maps Commanding Heights Online resources to criteria from The College Board's "Advanced Placement Program Course Description: Economics."


  Basic Economic Concepts
Measurement of Economic Performance
National Income and Price Determination
Economic Growth
International Finance, Exchange Rates and Balance of Payments

  I. Basic Economic Concepts

  C. Specialization and comparative advantage: the basis for international trade

AP Overview of Basic Economic Concepts

"A macroeconomics course introduces students to fundamental economic concepts such as scarcity and opportunity costs. Students will study comparative advantage to determine the basis on which mutually advantageous trade can take place between countries and to identify comparative advantage from differences in output levels and labor costs. Other basic concepts that are explored include the functions performed by an economic system and the way the tools of supply and demand can be used to analyze a market economy. Coverage of these concepts provides students with the foundation for a thorough understanding of macroeconomics and puts the macroeconomic material of the course in proper perspective."

Relevant Content Material from Commanding Heights Online

Students can identify nations that have implemented specialization and comparative advantage economies by launching the Time-Map (rich-media/broadband only) and scrolling through the years using the color key (sky blue = outward directed, comparative advantage economies). They can identify the points in time that such policies were put in place, becoming aware of the global trends in economic policy formation over time. They will notice the vast expansion in the number of nations pursuing outward directed, comparative advantage policies since the 1970s, and in particular since the 1990s due, in many cases, to pressure from the IMF and World Bank. Students can examine comparative outcomes for nations pursuing more tightly controlled directed market policies, which are externally focused but with more highly regimented state control over industrial policy.

From the Time-Map, students can launch the individual, more detailed Country Reports for these nations during the periods in which these policies were in place. The reports include economic data to determine whether trade expanded as a result of these policies and what effects, if any, the policies had over time on overall economic growth, per capita income, debt, and other outcomes. For several of these nations, students can use the search function to find related interviews that bear on the events and policies under consideration.

Worthwhile examples of outward directed, comparative advantage policy in action are found in the following country reports: Hong Kong (especially from '60s on), Chile (from 1974), Argentina (from 1976), Egypt (after 1977), Turkey (after 1980), Brazil and Bolivia (after 1985), Tanzania (from 1987), Mexico (from 1988), Peru (from 1990), Taiwan and India (from 1991), Russia (1992), South Africa (1995), Singapore and Pakistan (after 1997), Malaysia, Indonesia, and Thailand (after 1998), and Korea (after 1999).

Countries focused primarily on a directed market approach include Japan (from 1952), Taiwan (from 1957), Singapore (from 1959), South Korea (1961-1998), Malaysia (from 1972), Thailand (1972-1997), Indonesia (1982-1997), and China (from 1993).

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  II. Measurement of Economic Performance

  1. Gross national product, gross domestic product, and national income concepts
  2. Inflation and price indices
  3. Unemployment
from AP Overview of Measurement of Economic Performance

Since the performance of the economy as a whole is usually measured by trends in gross national product, gross domestic product, inflation, and unemployment, an effective AP course is structured with the importance of these concepts in mind. The course covers the components of gross income measures and the costs of inflation and unemployment. . .

As the course moves from mere static descriptions to dynamic models, it considers the actual levels of U.S. inflation, unemployment, gross national product, and gross domestic product, as well as the ways that changes in one may affect the others.

Relevant Content Material from Commanding Heights Online

The Country Reports allow rapid comparison through graphs of key economic indicators for 41 nations (see Countries to view the complete list of nations). These indicators include GDP growth year by year, per capita income (adjusted for inflation), inflation, and unemployment for all years that data was available from the IMF and World Bank. Economic indicators are tracked in the context of a country's political history, economic policies, social issues, rule of law, monetary policy, environmental issues, and more. Students can use the color-coded Time-Map (available on the rich-media/broadband version of the site only) in conjunction with the Country Reports to quickly compare the economic policies in force for the nations under study.

In addition, Unit One: Introducing Economic Growth, in the Activities provided with the Educators' Guide, concentrates on interpretation of measures for growth, income and distribution.

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  III. National Income and Price Determination

  1. Fiscal-monetary mix
    1. Interaction of fiscal and monetary policy
    2. Government budget policies
Frm AP Overview National Income and Price Determination

"Students should also examine the economic effects of government budget deficits, including crowding out, consider the issues involved in determining the burden of the national debt, and explore the relationships between deficits, interest rates, and inflation.

It is important for students to understand why many economists believe that the aggregate supply curve may be upward-sloping in the short run but vertical in the long run. With this understanding, students can distinguish between the short-run and long-run impacts of monetary and fiscal policies and trace the short-run and long-run effects of supply shocks...

A well-rounded course also includes an examination of the significance of inflationary expectations."

Relevant Content Material from Commanding Heights Online

Episode One as a whole focuses on the contrasting economic philosophies of John Maynard Keynes and the Keynesians, on the one hand, on the one hand, and Friedrich von Hayek, Milton Friedman and the Chicago school, on the other. The outcome of both philosophies in action is tracked throughout Episodes One and Two. While a detailed study of the tools of monetary policy is not included in the program, these two episodes can give students a sound historical understanding of the primary debate over government use of fiscal vs. monetary measures to manage economic activity.

Educators and students can orient themselves to the structure of this material by going directly to the main page of the Storyline section of the site, there reading the descriptions of Episodes One and Two, and then scanning the chapter menus and transcripts for each episode.

Students will find much material on the site related to monetary and fiscal economic policies by searching the terms "Keynes," "Hayek," "Friedman," "Harberger," "Keynesianism," "monetary policy," "monetarism," and "fiscal policy."

Other useful material includes extensive interviews with Milton Friedman and Al Harberger, both Nobel Prize winning monetarists, John Galbraith, a leading Keynesian economist, and Lord Robert Skidelsky, an economic historian and Keynes' biographer.

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  IV. Economic Growth

AP Overview of Economic Growth

"Students should understand the contributions of economic growth to job creation and economic well-being. The determinants of economic growth should be emphasized. Furthermore, the impacts of monetary and fiscal policies on the growth of a nation's economy should be studied."

Relevant Content Material from Commanding Heights Online

Students can explore the Country Reports of 41 nations and also search on the term "growth" to study factors influencing economic growth in many parts of the world over the last 92 years. They can also read numerous interviews on the topic in the People section. The activities of Unit One: Introducing Economic Growth included in this Educator's Guide focus on the relationship between economic growth, per capita income and income distribution.

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  V. International Finance, Exchange Rates and Balance of Payments

  1. International trade and policy
  2. International finance, exchange rates, and balance of payments
AP Overview on International Finance, Exchange Rates, and Balance of Payments

"The formulation of macroeconomic policy has important ramifications for international economics. Students need to understand that the combination of monetary and fiscal policies used in addressing problems of inflation and unemployment has an effect on international factors such as exchange rates and the balance of payments. Students also need to understand the reverse: that international forces, often beyond a country's control, affect a country's exchange rates, which, in turn, affect a country's price level, unemployment, and level of output. It is important to examine what the effects of trade restrictions are, how the international payments system hinders or facilitates trade, how domestic policy actions affect international finance and trade, and how international exchange rates affect domestic policy goals."

Relevant Content Material from Commanding Heights Online

The Time-Map (rich-media/broadband version of the site only) and the 41 Country Reports ( available in both versions) enable students to examine and compare debt and trade outcomes under different economic regimes over the last 92 years.

Episode Three is primarily concerned with the forces mentioned in the AP Overview above. Its chapters dramatize and clarify the interrelationship of trade policy, international capital flows, and exchange rates and their influence in the spread of globalization in the 1990s, the advent of the Mexican debt crisis of 1994, and the Asian economic crisis of 1997-8.

Especially relevant chapters include those on the NAFTA trade agreement (Episode Three, Chapters 3,4, and 21); those on the expansion of global financial markets (Episode Three, Chapters 5 and 6), the Mexico╣s debt crisis in 1994 (Episode Three, Chapter 7), and the sections of the Asian economic crisis of 1997, (Episode Three, Chapters 11, 12, 13 and 14)

Students can also explore NAFTA and other topics in much greater detail by searching on the relevant terms and exploring the returns.

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  AP Guide: Microeconomics | Macroeconomics

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