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)