Unit Two: Measurement of Economic Performance
McConnell and Brue Ch. 7 and 9 (2 weeks)
Unit 2 and 3 Test:__________________
AP Outline:
Measurement of Economic Performance (12-16% of exam)
- National Income Accounts- Circular Flow, Gross Domestic Product, Components of Gross Domestic Product, Real versus Nominal Gross Domestic Product
- Inflation Measurement and Adjustment- Price Indices, Nominal and Real Values, Costs of Inflation
- Unemployment- Definition and Measurement, Types of Unemployment, Natural Rate of Unemployment
Key Concepts: measuring gross domestic product, relationships between GDP, domestic product,
national income, personal income, and disposable income, nature and function of a GDP price index, difference between nominal and real GDP, limitations of measuring GDP, business cycle and its primary phases, how unemployment and inflation are measured, types of unemployment and inflation and their impacts
Graphs: circular flow model, business cycle
Vocabulary: national income accounting, gross domestic product, intermediate goods, final goods, multiple counting, value added, expenditures approach, income approach, personal consumption expenditures, gross private domestic investment, net private domestic investment, government purchases, net exports, national income, consumption of fixed capital, net domestic product, personal income, disposable income, nominal GDP, real GDP, price index, business cycle, peak, recession, trough, expansion, labor force, unemployment rate, discouraged workers, frictional unemployment, structural unemployment, cyclical unemployment, full-employment rate of unemployment, natural rate of unemployment, potential output, GDP gap, Okun’s law, inflation, consumer price index, demand-pull inflation, cost-push inflation, nominal income, real income, deflation, hyperinflation
Unit Three: National Income and Price Determination
McConnell and Brue Ch. 10 and 12 (2 weeks)
Unit Two and Three Test:__________________
AP Outline:
National Income and Price Determination (10-15% of exam)
- Aggregate Demand (Determinants, Multiplier, and Crowding-Out Effects)
- Aggregate Supply (Short-Run vs. Long-Run Analysis, Sticky vs. Flexible Wages and Prices, Determinants)
- Macroeconomic Equilibrium (Real Output and Price Level, Short and Long Run, Actual vs. Full-Employment Output, Economic Fluctuations)
Key Concepts: how changes in income affect consumption, how changes in interest rates affect investment, why changes in investment increase or decrease real GDP by a multiple amount, aggregate demand and its determinants, aggregate supply and its determinants, how AD and AS determine an economy’s equilibrium price level and level of real GDP, how AD-AS model explains periods of demand-pull inflation, cost-push inflation, and recession
Graphs: consumption and savings schedules, investment demand curve, AD-AS model
Vocabulary: marginal propensity to consume, marginal propensity to save, expected rate of return, investment demand curve, multiplier, aggregate demand, real-balances effect, interest-rate effect, foreign purchases effect, aggregate supply, short-run aggregate supply curve, long-run aggregate supply curve, equilibrium price level, equilibrium real output
