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A. P. Economics (APE)A. P. Economics (APE)
Seating ChartSeating Chart
APE: The CourseAPE: The Course
Course Objectives
Course Objectives Learn vs. Achieve
3 Choices
Learn vs. Achieve 3 Choices
The ChoicesThe Choices
One Teach to the test!!!!
Two Think like an economist!!!!
Three Reach for the stars!!!!
Do Both. This is the correct answer.
One Teach to the test!!!!
Two Think like an economist!!!!
Three Reach for the stars!!!!
Do Both. This is the correct answer.
The A. P. Economics TestThe A. P. Economics Test
2 separate Tests
Microeconomics & Macroeconomics
Scores (0-5)
One Semester of college credit each
May 17th, 2012
2 separate Tests
Microeconomics & Macroeconomics
Scores (0-5)
One Semester of college credit each
May 17th, 2012
Course FocusCourse Focus
Real world Application of material to current
events Opening Q’s
Test Preparation Problem sets Graphing Grading
Real world Application of material to current
events Opening Q’s
Test Preparation Problem sets Graphing Grading
What is economics?What is economics?
How to allocate limited resources with unlimited wants and desires.
Choices
Incentives
Costs vs. benefits
How to allocate limited resources with unlimited wants and desires.
Choices
Incentives
Costs vs. benefits
Areas of studyAreas of study
Microeconomics
Demand Supply Price equilibrium Market structures Sources of capital
Microeconomics
Demand Supply Price equilibrium Market structures Sources of capital
Macroeconomics
Monetary policy Fiscal policy Government International
Trade Performance Challenges
Macroeconomics
Monetary policy Fiscal policy Government International
Trade Performance Challenges
Grading Grading
Participation Tests Homework Group work Current events/Readings Investment portfolio Honours paper
Depends on completed assignments within grading period
Participation Tests Homework Group work Current events/Readings Investment portfolio Honours paper
Depends on completed assignments within grading period
ExpectationsExpectations
Participate
Adults
Meet deadlines
Have fun!
Do well!
Participate
Adults
Meet deadlines
Have fun!
Do well!
A Brief History of Economics
A Brief History of Economics
The development of different schools of thought
The development of different schools of thought
Early InfluencesEarly Influences British Maritime Trade British Maritime Trade
Edmund Burke, British Parliament“Some of the chief principles of commerce; such as the advantage of free intercourse between all parts of the same kingdom...the evils attending restriction and monopoly...and that the gain of others is not necessarily our loss, but on the contrary an advantage by causing a greater demand for such wares as we have for sale”
Alexander Hamilton, First U.S. Treasury Secretary
“A national debt, if it is not excessive, will be to us a national blessing.”
Adam Smith Adam Smith
Wealth of Nations (1776)
Invisible Hand Laissez faire Growth of wealth Anti-government Fueled by growth
of labor pool
Wealth of Nations (1776)
Invisible Hand Laissez faire Growth of wealth Anti-government Fueled by growth
of labor pool
Smith leads to Birth of ….Smith leads to Birth of ….
Economics
Capitalism
Classical School of Economic Thought
Economics
Capitalism
Classical School of Economic Thought
Classical & Neoclassical Economics
Classical & Neoclassical Economics
Positive or Good Influences Market Trade
Negative or Bad Influences Government/taxes Trade restrictions
Many Unknowns
Positive or Good Influences Market Trade
Negative or Bad Influences Government/taxes Trade restrictions
Many Unknowns
Continued Development (neo)
Alfred Marshall Math Supply & Demand
Continued Development (neo)
Alfred Marshall Math Supply & Demand
Industrial RevolutionIndustrial Revolution Renowned for
Communist Manifesto (1848)
Politics based on economic analysis
Labor & wealthy fighting over profits
Increase in wealth at expense of workers
Capitalism as unstable
Socialism
Renowned for Communist Manifesto (1848)
Politics based on economic analysis
Labor & wealthy fighting over profits
Increase in wealth at expense of workers
Capitalism as unstable
SocialismKarl Marx
Downfall Of Neoclassical Economics
Downfall Of Neoclassical Economics
John Maynard KeynesJohn Maynard Keynes
Intellectual
Challenged Treaty of Versailles
Gold Standard
Intellectual
Challenged Treaty of Versailles
Gold Standard
Keynesian School of Thought
Keynesian School of Thought
The General Theory of Employment, Interest & Money (1936)
Business Cycle
Government needed to guide capitalism
Father of modern economics & “mixed economy.”
Sammuelson 1948 Textbook
The General Theory of Employment, Interest & Money (1936)
Business Cycle
Government needed to guide capitalism
Father of modern economics & “mixed economy.”
Sammuelson 1948 Textbook
Bretton WoodsBretton Woods
1944 Allied Conference Creates Modern Financial System
World Bank IMF
1944 Allied Conference Creates Modern Financial System
World Bank IMF
Keynesian EconomicsKeynesian Economics
WW II - 70’s
Monetary & Fiscal Policy
Government can help
Great Society
WW II - 70’s
Monetary & Fiscal Policy
Government can help
Great Society
Downfall Of Keynesian Economics
Downfall Of Keynesian Economics
New Classical / Monetarism
New Classical / Monetarism
Milton Friedman - Creator of “Chicago School” Expectations Anti-Keynesian Monetary Supply Growth equal to Economic Growth Government is the problem
Milton Friedman - Creator of “Chicago School” Expectations Anti-Keynesian Monetary Supply Growth equal to Economic Growth Government is the problem
Efficient Market Hypothesis
Efficient Market Hypothesis
Assumptions:
Efficiency The markets immediately incorporates all
information Rationality
People act in a rational manner at all times
Risk Since the market knows all, the only risk
is how closely does an investment follow the market Beta
Assumptions:
Efficiency The markets immediately incorporates all
information Rationality
People act in a rational manner at all times
Risk Since the market knows all, the only risk
is how closely does an investment follow the market Beta
Efficient Market Hypothesis
Efficient Market Hypothesis
Conclusions:
Econometrics Mathematical Models
Laissez-faire Economists enter the Boardroom &
Wall Street Moderation
Belief that proper Monetary Policy can override the business cycle (& Keynesians too!) Greenspan
Conclusions:
Econometrics Mathematical Models
Laissez-faire Economists enter the Boardroom &
Wall Street Moderation
Belief that proper Monetary Policy can override the business cycle (& Keynesians too!) Greenspan
New ClassicalNew Classical
Econometrics
Monetary Policy Anti-inflation Sustained Growth
Laissez-Faire
Underlying assumptions problematic
Econometrics
Monetary Policy Anti-inflation Sustained Growth
Laissez-Faire
Underlying assumptions problematic
Downfall Of the New Classical School
Downfall Of the New Classical School
New KeynesianNew Keynesian
Addresses problems from New Classical
Irrational Behavior Long-term vs. Short-term
Market Inefficiencies Sticky Prices
Addresses problems from New Classical
Irrational Behavior Long-term vs. Short-term
Market Inefficiencies Sticky Prices
The Ongoing Debate
The Ongoing Debate
Saltwater vs. Fresh Water
Additional ReadingsAdditional Readings
Paul Krugman, Princeton University “How did Economists get it so wrong?” (NY
Times 9/6/09)
Gregory Mankiw, Harvard University “The Macroeconomist as Scientist &
Engineer” (May 2006)
John Cassidy, New Yorker Magazine After the Blow-up: Laissez-faire Economists
do some soul-searching & finger-pointing. (1/11/10)
Paul Krugman, Princeton University “How did Economists get it so wrong?” (NY
Times 9/6/09)
Gregory Mankiw, Harvard University “The Macroeconomist as Scientist &
Engineer” (May 2006)
John Cassidy, New Yorker Magazine After the Blow-up: Laissez-faire Economists
do some soul-searching & finger-pointing. (1/11/10)