PBL: Macroeconomics. Competency: Aggregate Demand and Supply. Competency: Consumption and Saving

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1 Competency: Aggregate Demand and Supply 1. Define aggregate demand and aggregate supply. 2. Describe the individual components of aggregate demand and aggregate supply. 3. Describe the problem that leakages present for maintaining aggregate demand, and the classical and Keynesian approaches to leakages. 4. Explain the derivation of the Aggregate Demand Equilibrium curve relating inflation and output levels, and how it shifts. 5. Explain the derivation of the Aggregate Supply Response curve relating inflation and output levels, and how it shifts. 6. Use the ASR/ADE model to describe the consequences of changes in fiscal policy, monetary policy, supply shocks, and investor and consumer confidence, depending on whether an economy is in a recession or at full employment. 7. Explain how aggregate demand and aggregate supply are used as a model of the macro economy. 8. Discuss the effects of aggregate demand and aggregate supply on the levels of output, employment, and prices. 9. Discuss how the determents of planned consumption and planned investment relate to aggregate demand. 10. Describe how Aggregate Demand and Aggregate Supply determine equilibrium price and output in the short-run and the long-run. Competency: Consumption and Saving 1. Discuss how the equilibrium levels of income, consumption, investment, and savings are determined in the Keynesian model, as presented in equations and graphs. 2. Identify the risk/return trade-offs for saving and investing. 3. Evaluate the impact of employment/unemployment on investment and savings. 4. Describe how saving and investing influence economic growth (capital formation). 5. Describe how interest rates balance savings and borrowing and affect consumer purchasing power. 6. Evaluate the impact of employment/unemployment on production, consumption, and exchange. 7. Describe the relationship of consumption and of saving to the economy. 8. Describe the effects of consumption on economic growth, inflation, and recession. 9. Describe the real gross domestic product. 10. Identify how the depreciation of natural capital can be included in measures of production and saving. 11. Discuss how consumption and saving affect the business cycle. Page 1

2 Competency: Economic Development 1. Explain the difference between economic growth and economic development. 2. List various factors that play a role in economic development. 3. Discuss the relationship between economic development and human development. 4. Identify major environmental challenges facing economic development. 5. Describe the causes of economic growth and development. 6. Describe the purpose of economic development in a city, state, or country. 7. Analyze policies and issues for economic development. 1. Define exchange rates. Competency: Exchange Rates 2. Describe how governments manipulate exchange rates for a purpose. 3. Explain how currency exchange rates affect international trade. 4. Discuss the concepts of Comparative Advantage, balance of payments and its components, and the determinants of exchange rates. 5. Calculate foreign exchange rates of various currencies. 6. Distinguish between currencies (e.g., floating versus fixed and convertible versus nonconvertible). 7. Explain how currency is affected by supply and demand. 8. Explain the duties of the International Monetary Fund. Page 2

3 Competency: Fiscal and Monetary Policies 1. Determine the difference between monetary and fiscal policy. 2. Compare the advantages and disadvantages of fiscal and monetary policies. 3. Discuss the accomplishments and limitations of monetary and fiscal policies. 4. Describe the types of monetary and fiscal policy tools. 5. Determine what changes will occur in output, employment, incomes, and prices when certain monetary and fiscal policy tools are implemented. 6. Differentiate between monetary and fiscal policies and identify when it may be appropriate to use a given policy. 7. Discuss the role of fiscal policy and the impact it can have on an economic system. 8. Describe how the government can affect the economy through fiscal policy. 9. Discuss the issue of lags in fiscal policy, and the relative advantages and disadvantages of automatic and discretionary policies. 10. Discuss the role of monetary policy and the impact it can have on an economic system. 11. Explain how federal budgetary policy and the Federal Reserve System s monetary policies influence overall levels of employment, interest rates, production, and prices. 12. Explain how monetary policy is expected to affect investment and aggregate demand. 13. Explain how the Federal Reserve System uses its control over the reserve ratio, open market operations, and the discount rate to control the money supply and the implementation of tight and easy money policy. Competency: Government Deficit and Debit 1. Distinguish between government deficits and government debt. 2. Describe the major types of government outlays, and major government revenue sources. 3. Analyze the relationship between the federal deficit and the national debt and how they are affected by the sources of national income and international trade. 4. Describe the role of government in the circular flow (e.g., taxation, services, and national debt). 5. Discuss the federal budget process and assess the impact of the government budget deficit and government debt and how they influence the economy. 6. Describe what causes a budget deficit and how does it change. 7. Describe why government deficit and debt rises when the economy is in a recession/depression. 8. Discuss the impact of changes in government spending, taxes and transfer on aggregate demand, and output. Page 3

4 Competency: Gross Domestic Product 1. Define the Gross Domestic Product, and identify what is included and excluded in its measurement. 2. Describe the three approaches to measuring GDP. 3. Calculate GDP growth rates, nominal GDP, and real GDP. 4. Identify commonly used price indices, and construct a constant-weight price index. 5. Describe the value and limitations of the chained dollar method in measuring real GDP. 6. Discuss why GDP does not measure well-being, and describe two examples of alternative measures of economic wellbeing. 7. Interpret fluctuations in the GDP. 8. Discuss major factors that affect the level of a country s Gross Domestic Product (GDP) (e.g., quantity and quality of natural resources, quantity and quality of human capital, and quantity and quality of capital stock). 9. Locate the per capita GDP of various nations to compare the levels of economic well-being. 1. Compare and contrast inflation and deflation. Competency: Inflation and Deflation 2. Describe how inflation is thought to normally behave over the business cycle. 3. Describe possible sources and causes of inflation. 4. Explain the measurement of inflation/deflation. 5. Explain how inflation affects entire economic systems. 6. Explain what is meant by zero inflation. 7. Discuss the relationship between monetary policy and inflation. 8. Explain how the Consumer Price Index measures the rate of inflation and interpret its relationship to purchasing power. 9. Discuss characteristics of a deflated economy. 10. Describe what causes deflation and how can it be prevented. 11. Discuss the role of the Federal Reserve in countering deflation. Page 4

5 Competency: International Trade 1. Describe major recent developments in the volume of international trade and financial flows. 2. Describe the Ricardian model of trade, and the principle of comparative advantage. 3. Discuss arguments for and against free trade. 4. Explain basic principles of international finance. 5. Discuss the implications of openness for monetary policy. 6. Identify important international institutions concerned with trade and finance. 7. Discuss the effects of international trade and finance on employment, prices, and incomes. 8. Analyze the impact of international issues and concerns on personal, national, and international economics. 9. Explain how specialization promotes international trade and how international trade increases total world output and interdependence among nations. 1. Explain supply and demand in the money market. Competency: Money and Interest Rates 2. Describe the characteristics, functions, and types of money. 3. Describe the basic workings of private and central banks. 4. Define the quantity equation, the quantity theory of money, and monetarism. 5. Explain the development and role of money in an economic system. 6. Describe what is meant by the time value of money. 7. Explain the role of the Federal Reserve System and the process by which it controls the money supply and interest rates. 8. Explain how interest rates are determined by market forces that influence the amount of borrowing and saving done by investors, consumers, and government officials. 9. Discuss the relation of bond prices to interest rates. 10. Explain the difference between real and nominal interest rates and their impact on the economy. 11. Describe how interest rates balance savings and borrowing and affect consumer purchasing power. 12. Distinguish between short-term and long-term interest rates and explain their relative significance. Page 5

6 Competency: Recessions and Depressions 1. Illustrate and measure the impact of inflation and recession. 2. Define recession and describe the difference in recession and depression. 3. Describe macroeconomic indicators of a recession. 4. Discuss how government responds to a recession. 5. Explain how the New Deal (FDR s policy) of the 1930 s pushed the economy out of a depression. 6. Explain common elements of a depression. Competency: Stabilization 1. Identify and evaluate how stabilizers (e.g., unemployment compensation, welfare benefits, Social Security, subsidies, and tax rates) affect economies in transition. 2. Describe the purpose of a stabilization policy. 3. Explain the role of the government or central bank in crisis stabilization. 4. Describe the role of stabilization in a business cycle. 5. List strategies attempted through a stabilization policy. 1. Define and contrast employment and unemployment. Competency: Wages and Unemployment 2. Explain how employment and unemployment are officially measured. 3. Identify the causes, consequences, and possible solutions to unemployment. 4. Explain why some analysts prefer measures of labor force utilization that differ from the official unemployment rate. 5. Discuss economists notions of frictional, structural, and cyclical unemployment. 6. Describe the classical theory of unemployment. 7. Describe theories of labor market imperfections. 8. Describe Keynes theory of aggregate demand, as it relates to wage levels and employment. 9. Discuss the concepts of natural rate and non-accelerating inflation rate of unemployment, and their relation to empirical evidence. 10. Analyze the impact of labor market imperfections and various government policies on wages and incentives to work. 11. Discuss wage differences among jobs and professions, using the laws of demand and supply and the concept of productivity. 12. Explain the significance of an unemployment rate, the number of new jobs created monthly, an inflation or deflation rate, and a rate of economic growth. Page 6

7 References: Career Cluster Resources for Marketing, Sales & Service National Association of State Directors of Career Technical Education Consortium. Washington, DC. Career Cluster Resources for Business, Management and Administration National Association of State Directors of Career Technical Education Consortium. Washington, DC. Career Cluster Resources for Finance National Association of State Directors of Career Technical Education Consortium. Washington, DC. Business Education Standards. National Business Education Association. Reston, VA. Macroeconomics in Context Student Study Guide Global Development and Environment Institute, Tufts University, Medford, MA. Principles of Economics Course Competencies. Georgia Technical College, Atlanta, GA. Principles of Macroeconomics Course Syllabus. University of Colorado, Boulder, CO. Principles of Macroeconomics Course Outline. St. Petersburg College, St. Petersburg, FL. Macroeconomics Economic Principles Course Outline. Fullerton College, Fullerton, CA. Macroeconomics Course Syllabus Harrisburg Area Community College, Harrisburg, PA. Principles of Macroeconomics Course Syllabus. Henry Ford Community College, Dearborn, MI. Introduction to Macroeconomics Course Description James Madison University, Harrisonburg, VA. Principles of Macroeconomics Course Syllabus University of Hawaii, Honolulu, HI. Principles of Macroeconomics Course Description Stetson School of Business and Economics, Mercer University, Macon, GA. Economic and Policy Course Syllabus. Georgia Institute of Technology, Georgia Tech University, Atlanta, GA. Page 7

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