IB Economics Curriculum Outline

Standard level topics

Section 1: Introduction to economics

The purpose of this section is to introduce the basic terminology and concepts of economics. Students are encouraged to consider what markets and governments can and cannot do. This section of the syllabus gives them an early opportunity to begin to explain economic phenomena through the use of diagrams, data analysis and the evaluation of economic material. This section is intended to make students aware of the role of economics in real-world situations. Even at this initial stage teachers and students should consider the application of economic theories to developing countries, since development economics is integral to the course.

• Definitions of social science and economics

• Definitions of microeconomics and macroeconomics

• Definitions of growth, development, and sustainable development

• Positive and normative concepts

• Ceteris paribus

• Scarcity

• factors of production: land, labour, capital and management/entrepreneurship

• payments to factors of production: rent, wages, interest, profit

• Choice

• utility: basic definition

• opportunity cost

• free and economic goods

• production possibility curves: definition

• diagrams showing opportunity cost, actual and potential output

• diagrams showing economic growth and economic development

• Rationing systems

• basic economic questions

• what to produce?

• how to produce?

• for whom to produce?

• mixed economies

• public

• private

• central planning versus free market

• economies in transition


Section 2: Microeconomics

The purpose of this section is to identify and explain the importance of markets and the role played by demand and supply. The roles played by consumers, producers and the government in different market structures are highlighted. The failures of a market system are identified and possible solutions are examined.

The concepts learned here have links with other areas of the economics syllabus; for example, elasticity has many applications in different areas of international trade and development.

2.1 Markets
• Definition of markets with relevant local, national and international examples

• Brief descriptions of perfect competition, monopoly and oligopoly as different types of market structures, and monopolistic competition, using the characteristics of the number of buyers and sellers, type of product and barriers to entry

• Importance of price as a signal and as an incentive in terms of resource allocation

Demand

• Definition of demand

• Law of demand with diagrammatic analysis

• Determinants of demand

• Fundamental distinction between a movement along a demand curve and a shift of the demand curve

Supply

• Definition of supply

• Law of supply with diagrammatic analysis

• Determinants of supply

• Effect of taxes and subsidies on supply

• Fundamental distinction between a movement along a supply curve and a shift of the supply curve

Interaction of demand and supply

• Equilibrium market clearing price and quantity

• Diagrammatic analysis of changes in demand and supply to show the adjustment to a new equilibrium

Price controls

• Maximum price: causes and consequences

• Minimum price: causes and consequences

• Price support/buffer stock schemes

• Commodity agreements

2.2 Elasticities

Price elasticity of demand (PED)

• Formula

• Definition

• Possible range of values

• Diagrams illustrating the range of values of elasticity

• Varying elasticity along a straight-line D curve

• Determinants of price elasticity of demand

Cross-elasticity of demand

• Definition

• Formula

• Significance of sign with respect to complements and substitutes

Income elasticity of demand

• Definition

• Formula

• Normal goods

• Inferior goods

Price elasticity of supply

• Definition

• Formula

• Possible range of values

• Diagrams illustrating the range of values of elasticity

• Determinants of price elasticity of supply

Applications of concepts of elasticity

• PED and business decisions: the effect of price changes on total revenue

• PED and taxation

• Cross-elasticity of demand: relevance for firms

• Significance of income elasticity for sectoral change (primary, secondary, tertiary) as economic growth occurs

2.4 Market failure

Reasons for market failure

• Positive and negative externalities, with appropriate diagrams

• Short-term and long-term environmental concerns, with reference to sustainable development
• Lack of public goods

• Underprovision of merit goods

• Overprovision of demerit goods

• Abuse of monopoly power

Possible government responses

• Legislation

• Direct provision of merit and public goods

• Taxation

• Subsidies

• Tradable permits

• Extension of property rights

• Advertising to encourage or discourage consumption

• International cooperation among governments

Section 3: Macroeconomics

The purpose of this section is to provide students with the opportunity for a detailed examination of the major macroeconomic issues facing countries' economic growth, economic development, unemployment, inflation and income distribution.

Section 4 deals with external equilibrium. Income distribution is introduced here in section 3 but is addressed in greater detail in section 5.

The economic strategies available to governments—demand-side policies, supply-side policies, direct intervention—are introduced and evaluated. These policies are applicable to almost all areas of macroeconomics, international economics and development economics.

3.1 Measuring national income

• Circular flow of income

• Methods of measurement—income, expenditure and output

• Distinction between:
• gross and net

• national and domestic

• nominal and real

• total and per capita

3.2 Introduction to development

• Definitions of economic growth and economic development

• Differences in the definitions of the two concepts

• Gross Domestic Product (GDP) versus Gross National Product (GNP) as measures of Growth

• Limitations of using GDP as a measure to compare welfare between countries

• Allowance for differences in purchasing power when comparing welfare between countries

• Alternative methods of measurement

• Problems of measuring development

3.3 Macroeconomic models

• Aggregate demand—components

• Aggregate supply

• short-run

• long-run (Keynesian versus neo-classical approach)

• Full employment level of national income

• Equilibrium level of national income

• Inflationary gap

• Deflationary gap

• Diagram illustrating trade/business cycle

3.4 Demand-side and supply-side policies

• Shifts in the aggregate demand curve/demand-side policies

• fiscal policy

• interest rates as a tool of monetary policy

• Shifts in the aggregate supply curve/supply-side policies

• Strengths and weaknesses of these policies

3.5 Unemployment and inflation

Unemployment

• Full employment and underemployment

• Unemployment rate

• Costs of unemployment

• Types of unemployment

• structural

• frictional

• seasonal

• cyclical/demand-deficient

• real wage

• Measures to deal with unemployment

Inflation

• Definitions of inflation and deflation

• Costs of inflation and deflation

• Causes of inflation

• cost push

• demand pull

• excess monetary growth

3.6 Distribution of income

• Direct taxation

• Indirect taxation

• Progressive taxation

• Proportional taxation

• Regressive taxation

• Transfer payments

Section 4: International economics

The purpose of this section is to encourage candidates to understand why countries trade, the problems involved and how these problems are addressed. Students need to understand how exchange rates affect international trade. The international trade theory introduced in this section should be related to real-world examples.

4.1 Reasons for trade

• Differences in factor endowments

• Variety and quality of goods

• Gains from specialization

• Political

4.2 Free trade and protectionism

Definition of free trade

Types of protectionism

• Tariffs

• Quotas

• Subsidies

• Voluntary Export Restraints (VERs)

• Administrative obstacles

• Health and safety standards

• Environmental standards

Arguments for protectionism

• Infant industry argument

• Efforts of a developing country to diversify

• Protection of employment

• Source of government revenue

• Strategic arguments

• Means to overcome a balance of payments disequilibrium

• Anti-dumping

Arguments against protectionism

• Inefficiency of resource allocation

• Costs of long-run reliance on protectionist methods

• Increased prices of goods and services to consumers

• The cost effect of protected imports on export competitiveness

4.3 Economic integration

Globalization

Trading blocs

• Free trade areas (FTAs)

• Customs unions

• Common markets

4.4 World Trade Organization (WTO)

• Aims

• Success and failure viewed from different perspectives

4.5 Balance of payments

• Current account

• balance of trade

• invisible balance

• Capital account

4.6 Exchange rates

• Fixed exchange rates

• Floating exchange rates

• Managed exchange rates

• Distinction between

• depreciation and devaluation

• appreciation and revaluation

• Effects on exchange rates of

• trade flow

• capital flows/interest rate changes

• inflation

• speculation

• use of foreign currency reserves

4.7 Balance of payment problems

• Consequences of a current account deficit or surplus

• Methods of correction

• managed changes in exchange rates

• reduction in aggregate demand/expenditure-reducing policies

• change in supply-side policies to increase competitiveness

• protectionism/expenditure-switching policies

• Consequences of a capital account deficit or surplus

4.8 Terms of trade

• Definition of terms of trade

• Consequences of a change in the terms of trade for a country's balance of payments and
domestic economy

• The significance of deteriorating terms of trade for developing countries

Section 5: Development economics

Throughout the course, students are introduced to several important concepts in development economics and, in particular, to the fundamental distinction between economic growth and economic development established in section 3. This important distinction needs to be re-emphasized at the beginning of this section.

Given the dynamic nature of the international economy, it is problematic to group countries into clearly established categories such as developed, developing, newly industrialized countries (NICs) and transition economies. However, students should understand current terminology and be aware that similarities and differences exist within different categories. It is important for teachers to help students find relevant examples of the different categories of countries.

The main purpose of this section is to provide students with the opportunity to understand the problems faced by developing countries, and to develop an awareness of possible solutions to these problems.

5.1 Sources of economic growth and/or development

• Natural factors: the quantity and/or quality of land or raw materials

• Human factors: the quantity and/or quality of human resources

• Physical capital and technological factors: the quantity and/or quality of physical capital

• Institutional factors that contribute to development

• banking system

• education system

• health care

• infrastructure

• political stability

5.2 Consequences of growth

• Externalities

• Income distribution

• Sustainability

5.3 Barriers to economic growth and/or development

• Poverty cycle: low incomes--low savings--low investment--low incomes

• Institutional and political factors

• ineffective taxation structure

• lack of property rights

• political instability

• corruption

• unequal distribution of income

• formal and informal markets

• lack of infrastructure

• International trade barriers

• overdependence on primary products

• consequences of adverse terms of trade

• consequences of a narrow range of exports

• protectionism in international trade

• International financial barriers

• indebtedness

• non-convertible currencies

• capital flight

• Social and cultural factors acting as barriers

• religion

• culture

• tradition

• gender issues

5.4 Growth and development strategies

• Harrod-Domar growth model

• Structural change/dual sector model

• Types of aid

• bilateral, multilateral

• grant aid, soft loans

• official aid

• tied aid

• Export-led growth/outward-oriented strategies

• Import substitution/inward-oriented strategies/protectionism

• Commercial loans

• Fair trade organizations

• Micro-credit schemes

• Foreign direct investment

• Sustainable development

5.5 Evaluation of growth and development strategies

• Evaluation of the following in terms of achieving growth and/or development

• aid and trade

• market-led and interventionist strategies

• The role of international financial institutions

• the International Monetary Fund (IMF)

• the World Bank

• private sector banks

• non-governmental organizations (NGOs)

• multinational corporations/transnational corporations (MNCs/TNCs)

• commodity agreements

IB Economics Syllabus

Mr. Scott
Email: mscott@bishopamat.org
Amat ext. 7402
Class Website: http://mrscottecon.blogspot.com
This course fulfills the senior requirement for economics. Students are enrolled for a full year and complete the IB Economics SL curriculum. They are required to complete both the IB internal and external assessments.

Grading: 50% Tests and Quizzes
30% Internal Assessment/Projects
10% Classwork and Participation
10% Homework

Textbook: Economics by Paul Krugman & Robin Wells, (Worth, 2005)

Summer Reading: Confessions of an Economic Hit Man by John Perkins (Plume, 2004)

Supplemental Reading: Naked Economics by Charles Wheelan (Norton, 2010)


Internal and External Assessments:

Internal assessment consists of a portfolio of four commentaries based on news media extracts that link economic theory to real-world situations. The external assessment involves two written examination papers. Paper one consists of a choice of one of four extended response questions based on the five main sections of the course. Paper two consists of a choice of three of five data-response questions.

Required Materials:

Binder or folder for handouts with college rule loose-leaf
Black or blue pens, red pen, # 2 pencils
Calculator for basic mathematical equations


Expectations:

1) Approach your studies with the motivation, determination, and commitment that an IB course requires.

2) Complete all reading assignments by the assigned date. Students are expected to budget their time and complete their reading in an environment that is conducive to study.

3) Complete all written assignments by the date on which they are due. Late work will be severely penalized.

4) Make-up assignments that are missed because of illness, sports, or extra-curricular activities as specified in Lancer Life. Because of the block schedule, make-up assignments should be given to Mr. Scott in the College Center if class is not scheduled the day you return to school.

5) Work in a cooperative and responsible manner. Students should seek assistance from either Mr. Scott or one of their classmates whenever they are absent to be aware of what took place in the missed class period(s).

6) Bring required materials to class each day.

7) Follow all policies and regulations as indicated in Lancer Life regarding conduct and behavior.

8) Students are expected to engage in independent study and review in addition to regular class requirements in order to prepare for the IB external assessment in May. Additional review sessions which are optional, but highly recommended, will be scheduled as needed.

9) Specific reminders:

Be courteous and respectful toward one another and the teacher at all times.
Act respectfully during times of prayer and during religious services.
Be on-time to class.
Do not talk in class unless you are appropriately answering a question or participating in a group activity.
Sit in your assigned seat and do not wander during class.
Do not do work for other courses during this period.
Do not put your books away before the end of class.
Hall passes are only given to the infirmary or in the case of an emergency.
Do not write or carve on the desks.
Do not write on or keep handouts from classroom sets.
Food, beverages, or gum are not allowed inside or near the classroom.
Be cooperative with and follow the directions of substitute teachers.
Act politely toward guest speakers and other visitors.
Do not fool around with programmable calculators during class. Violators will have their calculators seized.
Wireless communication is not permitted to be used during class.

Revised 8/10

AP Macroeconomics Key Graphs

I. Production Possibility Curve

A. Efficiency
B. Inefficiency
C. Attainable versus unattainable combinations
D. Growth

II. Demand and Supply Graphs

A. Showing equilibrium
B. Shifts in supply or demand curves and effects

III. Circular Flow Model

A. Simple model: household and business, resource and product market
B. Simple model with government added
C. Open-economy macro model

IV. Business Cycle

A. Phases
1. Peak
2. Recession or contraction
3. Trough
4. Recovery or expansion

V. Aggregate Demand and Aggregate Supply

A. Equilibrium price level and output
B. AS long run and short run
C. Shifts in AD and AS curves (short run and long run)
D. Effects of fiscal and monetary policy actions

VI. Phillips Curve

A. Shape in short run and long run
B. Effects of AD shifts
C. Effects of AS shifts
D. Long-run position at natural rate of unemployment

VII. Money Market Graph

A. Equilibrium nominal rate of interest and quantity of money
B. Shifts of supply of and demand for money
C. Effect of shifts on equilibrium interest rate

VIII. Loanable Funds Market

A. Equilibrium real rate of interest and quantity of money
B. Shifts of supply of and demand for money
C. Effect of shifts on equilibrium interest rate

IX. Flexible Exchange Rates

A. Equilibrium price of currency and quantity of currency (equilibrium exchange rate)
B. Shifts of supply of and demand for currency
C. Effect of shifts on price of currency

AP Macroeconomics Learning Objectives

1. Define the science of economics.
2. Distinguish between opportunity cost, scarcity, and tradeoffs.
3. Distinguish between macroeconomics and microeconomics.
4. List the three basic economic questions.
5. Define comparative advantage and specialization and benefits of exchange.
6. Use a production possibilities curve to demonstrate opportunity cost and growth.
7. List the determinants of demand and supply.
8. Recognize which factors will cause demand curves or supply curves to shift.
9. Distinguish between changes in quantity demanded and a change in demand.
10. Distinguish between changes in quantity supplied and a change in supply.
11. Determine effects on price and quantity when equilibrium changes.
12. Describe the macroeconomic performance of the United States and other countries – gross domestic product (GDP), inflation, unemployment, and other indicators.
13. Define GDP by expenditure and income approaches.
14. Distinguish between nominal GDP and real GDP.
15. Explain the limitations of GDP measures.
16. Define unemployment; list sources and types.
17. Define the labor-force participation rate.
18. Define the full-employment level of GDP.
19. Distinguish between actual and potential GDP.
20. Explain the calculation of price indices – GDP deflator, consumer price index (CPI), and producer price index (PPI).
21. Use price indices to calculate real wages and real interest rates.
22. List the determinants of aggregate demand (AD).
23. Distinguish between changes in AD and a change in price level causing movement along the AD curve.
24. List reasons why the AD curve is down sloping.
25. List the determinants of aggregate supply (AS).
26. Distinguish between changes in AS and a change in price level causing movement along the AS curve.
27. Explain and demonstrate the shape of the AS curve in the short run and long run; define and show the full-employment level of output.
28. Determine the importance of the shape of the AS curve on the effects of change in the AD curve.
29. Determine the equilibrium using an AD/AS graph and show the effects on price level and real GDP when equilibrium changes in both the long run and the short run.
30. Given data, determine the size of the spending multiplier and assess its impact on AD.
31. Define fiscal policy – discretionary and nondiscretionary.
32. Define and measure the effect of built-in stabilizers on the economy.
33. Using AD/AS analysis, show the effect on price level and real gross domestic product (RGDP) of changes in fiscal policy.
34. Define the balance budget multiplier.
35. Distinguish between sticky price and sticky wage models and flexible price and flexible wage models; identify the effect of these differences on the AS curve.
36. Define and list factors influencing money demand.
37. Define money supply and other financial assets.
38. Demonstrate understanding of the time value of money.
39. Define a fractional banking system.
40. Explain the role of the Federal Reserve System in the economy.
41. Identify and examine the tools of the central bank policy and their impact on money supply and interest rates.
42. Describe the process of money creation and multiple-deposit expansion.
43. Given data, determine the size of the money multiplier and assess its impact on the money supply.
44. Distinguish between nominal and real interest rates.
45. Define the quantity theory of money.
46. Assess the effect of fiscal and monetary policy on real output, price level, and the level of employment in the long run and the short run.
47. Gain understanding of how an economy responds to a short-run shock and adjusts in the long run in the absence of any public policy actions.
48. Examine the economic effects of government deficit budgets, including “crowding out.”
49. Consider issues surrounding the size and burden of the national debt.
50. Gain understanding of inflation-unemployment tradeoffs using short-run and long-run Phillips curve analysis.
51. Shows the causes of inflation on an AD/AS model.
52. Speculate on the role of inflationary expectations on price level and output.
53. Define economic growth and list the factors that stimulate growth.
54. Assess the role of productivity in raising real output and standard of living.
55. Suggest how public policies stimulate economic growth.
56. Using graphical and tabular analysis, show the benefit of employing comparative advantage.
57. Explain how the balance of payments accounts are recorded.
58. Explain the effect of trade restrictions.
59. List the factors that influence equilibrium foreign exchange rates.
60. Using demand/supply analysis, show how market forces and public policy affect currency demand and currency supply.
61. Define currency appreciation and depreciation and relate both to graphical analysis.
62. State the effects of appreciation and depreciation on a country’s net exports.
63. Understand how changes in net exports and capital flows affect financial and goods markets.

AP Macroeceonomics Syllabus

A.P. MACROECONOMICS

Mr. Scott
email: mscott@bishopamat.org
Amat ext. 7402
Class Website: http://mrscottecon.blogspot.com


COURSE DESCRIPTION: This course is an AP level class that meets the senior requirement for economics. Students will study basic principles of economics and complete a general survey of topics in macroeconomics. Students are required to take the Advanced Placement Examination in Macroeconomics in May.

REQUIRED MATERIALS:

1) Macroeconomics by Krugman & Wells (Worth, 2005)

2) Summer Reading Assignment: Naked Economics by Charles Wheelan (Norton, 2010)

3) 5 Steps to a 5: AP Microeconomics/Macroeconomics 2010-2011 by Eric Dodge (McGraw Hill, 2010)

4) Binder or folder for handouts with college rule loose-leaf

5) Black or blue pens, red pen, # 2 pencils

6)Calculator for basic mathematical equations

GRADING:

1) 50% tests and quizzes.

2) 20% homework

3) 20% classwork, individual oral participation, and participation in group activities

4) 10% projects

EXPECTATIONS:

1) Approach your studies with the motivation, determination, and commitment
that an advanced placement course requires.

2) Complete all reading assignments by the assigned date. Students are expected to budget their time and complete their reading in an environment that is conducive to study.

3) Complete all written assignments by the date on which they are due. Late work will be severely penalized.

4) Make-up assignments that are missed because of illness, sports, or extra-curricular activities as specified in Lancer Life. Because of the block schedule, make-up assignments should be given to Mr. Scott in the College Center if class is not scheduled the day you return to school.

5) Work in a cooperative and responsible manner. Students should seek assistance from either Mr. Scott or one of their classmates whenever they are absent to be aware of what took place in the missed class period(s).

6) Bring required materials to class each day.

7) Follow all policies and regulations as indicated in Lancer Life regarding conduct and behavior.

8) Students are expected to engage in independent study and review in addition to regular class requirements in order to prepare for the AP test. Additional review sessions which are optional, but highly recommended, will be scheduled during the Spring semester.

9) Specific reminders:

a) Be courteous and respectful toward one another and the
teacher at all times.
b) Act respectfully during times of prayer and during religious services.
c) Be on-time to class.
d) Do not talk in class unless you are appropriately answering a question or participating in a group activity.
e) Sit in your assigned seat and do not wander during class.
f) Do not do work for other courses during this period.
g) Do not put your books away before the end of class.
h) Hall passes are only given to the infirmary or in the case of an emergency.
i) Do not write or carve on the desks.
j) Do not write on or keep handouts from classroom sets.
k) Food, beverages, or gum are not allowed inside or near the classroom.
l) Be cooperative with and follow the directions of substitute teachers.
m) Act politely toward guest speakers and other visitors.
n) Do not fool around with programmable calculators during class. Violators will have their calculators seized.
o) Wireless communion is not permitted to be used during class.

Revised 7/10