Advanced Placement Macroeconomics

Macroeconomics

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

(also known as AP Macroeconomics, AP Macro, or simply Macro) is a course offered by the College Board

College Board

The College Board is a membership association in the United States that was formed in 1900 as the College Entrance Examination Board . It is composed of more than 5,900 schools, colleges, universities and other educational organizations. It sells standardized tests used by academically oriented...

 as part of the Advanced Placement Program

Advanced Placement Program

The Advanced Placement program is a curriculum in the United States and Canada sponsored by the College Board which offers standardized courses to high school students that are generally recognized to be equivalent to undergraduate courses in college...

 for high school

High school

High school is a term used in parts of the English speaking world to describe institutions which provide all or part of secondary education. The term is often incorporated into the name of such institutions....

 students interested in college-level work in economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

. Study begins with fundamental economic concepts such as scarcity

Scarcity

Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...

, opportunity costs, production possibilities, specialization, comparative advantage

Comparative advantage

In economics, the law of comparative advantage says that two countries will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods...

, demand

Demand (economics)

In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay . The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time....

, supply

Supply (economics)

In economics, supply is the amount of some product producers are willing and able to sell at a given price all other factors being held constant. Usually, supply is plotted as a supply curve showing the relationship of price to the amount of product businesses are willing to sell.In economics the...

, and price determination. Major topics include measurement of economic performance, national income and price determination, fiscal and monetary policy

Monetary policy

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...

, and international economics and growth. AP Macroeconomics is frequently taught in conjunction with (and in some cases in the same year as) AP Microeconomics

AP Microeconomics

Advanced Placement Microeconomics is a course for students interested in college-level work in microeconomics and/or gaining advanced standing in college. The course begins with a study of fundamental economic concepts such as scarcity, opportunity costs, production possibilities, specialization,...

. It is equivalent to the introductory course of macroeconomics in college undergraduate level.

I. Basic Economic Concepts (8%-12%)

A. Scarcity, choice, and opportunity costs

B. Production possibilities curve

C. Comparative advantage, absolute advantage, specialization, and exchange

D. Demand, supply, and market equilibrium

E. Macroeconomic issues: business cycle, unemployment, inflation, growth

II.Measurement of Economic Performance (12%-16%)

A. National income accounts

1. Circular flow
2. Gross domestic product
3. Components of gross domestic product
4. Real versus nominal gross domestic product

B. Inflation measurement and adjustment

1. Price indices
2. Nominal and real values
3. Costs of inflation

C. Unemployment

1. Definition and measurement
2. Types of unemployment
3. Natural rate of unemployment

III. National Income and Price Determination (10%-15%)

A. Aggregate demand

1. Determinants of aggregate demand
2. Multiplier and crowding-out effects

B. Aggregate Supply

1. Short-run and long-run analyses
2. Sticky versus flexible wages and prices
3. Determinants of aggregate supply

C. Macroeconomic Equilibrium

1. Real output and price level
2. Short and long run
3. Actual versus full-employment output
4. Economic fluctuations

IV. Financial Sector (15%-20%)

A. Money, banking, and financial markets

1. Definition of financial assets: money, stocks, bonds
2. Time value of money (present and future value)
3. Measures of money supply
4. Banks and creation of money
5. Money demand
6. Money market
7. Loanable funds market

B. Central bank and control of the money supply

1. Tools of central bank policy
2. Quantity theory of money
3. Real versus nominal interest rates

V. Inflation, Unemployment, and Stabilization Policies (20%-30%)

A. Fiscal and monetary policies

1. Demand-side effects
2. Supply-side effects
3. Policy mix
4. Government deficits and debt

B. Inflation and unemployment

1. Types of inflation
2. Demand-pull inflation
3. Cost-push inflation
4. The Phillips curve: short run versus long run
5. Role of expectations

VI. Economic Growth and Productivity (5%-10%)

A. Investment in human capital

B. Investment in physical capital

C. Research and development, and technological progress

D. Growth policy

VII. Open Economy: International Trade and Finance (10%-15%)

A. Balance of payments accounts

1. Balance of trade
2. Current account
3. Capital account

B. Foreign exchange market

1. Demand for and supply of foreign exchange
2. Exchange rate determination
3. Currency appreciation and depreciation

C. Net exports and capital flows

D. Links to financial and goods markets

The exam

• Section I: Multiple Choice [70 minutes - worth 2/3 of the exam grade]
• Section II: Free-Response [60 minutes - worth 1/3 of the exam grade]

Section I consists of 60 questions. Be advised that the multiple-choice portion of the exam is constructed to reflect the weighting of topics on the AP Macroeconiomcs Topic Outline (above). For example, test-takers should expect to find between 3 and 6 questions of the 60 total questions on the multiple choice section pertaining to "economic growth" because Unit VI. Economic Growth and Productivity should comprise 5%-10% of the course material studied.

Grade distribution

In the 2010 administration, 83,146 students took the exam. The mean score was a 2.82.

The grade distribution for 2010 was:

Score	Percent
5	14.4%
4	25.6%
3	15.2%
2	16.6%
1	28.1%

Criticism

Tawni Ferrarini, James Gwartney, and John Morton have argued that the examination does not adequately cover recent advances in the field, writing that "[t]he AP macroeconomics exam and resources largely reflect the simplistic Keynesian view from the 1960s and 1970s."

External links

• AP:Macroeconomics

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