1.2 Microeconomics and Macroeconomics

1.3 How Economists Use Theories and Models to Understand

Economic Issues

1.4 How To Organize Economies: An Overview of Economic Systems

•       Explain the relationship between production and division of labor

•       Evaluate the significance of scarcity

•       Describe microeconomics

•       Describe macroeconomics

•       Contrast monetary policy and fiscal policy

•       Interpret a circular flow diagram

•       Explain the importance of economic theories and models

•       Describe goods and services markets and labor markets

•       Contrast traditional economies, command economies, and market economies

•       Explain gross domestic product (GDP)

•       Assess the importance and effects of globalization

Constraint

2.2 The Production Possibilities Frontier and Social Choices

2.3 Confronting Objections to the Economic Approach

•       Explain opportunity sets and opportunity costs

•       Evaluate the law of diminishing marginal utility

•       Explain how marginal analysis and utility influence choices

•       Interpret production possibilities frontier graphs

•       Contrast a budget constraint and a production possibilities frontier

•       Explain the relationship between a production possibilities frontier and the law of diminishing returns

•       Contrast productive efficiency and allocative efficiency

•       Define comparative advantage

3.2 Shifts in Demand and Supply for Goods and Services

3.3 Changes in Equilibrium Price and Quantity: The Four-Step

Process

3.4 Price Ceilings and Price Floors

3.5 Demand, Supply, and Efficiency

•       Identify a demand curve and a supply curve

•       Explain supply, quantity supplied, and the law of supply

•       Explain equilibrium, equilibrium price, and equilibrium quantity

•       Identify factors that affect demand

•       Graph demand curves and demand shifts

•       Identify factors that affect supply

•       Graph supply curves and supply shifts

•       Identify equilibrium price and quantity through the fourstep process

•       Graph equilibrium price and quantity

•       Contrast shifts of demand or supply and movements along a demand or supply curve

•       Graph demand and supply curves, including equilibrium price and quantity, based on real-world examples

•       Explain price controls, price ceilings, and price floors

•       Analyze demand and supply as a social adjustment mechanism

•       Contrast consumer surplus, producer surplus, and social surplus

•       Explain why price floors and price ceilings can be inefficient

•       Analyze demand and supply as a social adjustment mechanism

4.2 Demand and Supply in Financial Markets

4.3 The Market System as an Efficient Mechanism for Information

5.2 Polar Cases of Elasticity and Constant Elasticity

5.3 Elasticity and Pricing

5.4 Elasticity in Areas Other Than Price

•       Calculate the price elasticity of supply

•       Differentiate between infinite and zero elasticity

•       Analyze graphs in order to classify elasticity as constant unitary, infinite, or zero

•       Analyze how price elasticities impact revenue

•       Evaluate how elasticity can cause shifts in demand and supply

•       Predict how the long-run and short-run impacts of elasticity affect equilibrium

•       Explain how the elasticity of demand and supply determine the incidence of a tax on buyers and sellers

•       Calculate the income elasticity of demand and the crossprice elasticity of demand

•       Calculate the elasticity in labor and financial capital markets through an understanding of the elasticity of labor supply and the elasticity of savings

•       Apply concepts of price elasticity to real-world situations

6.2 How Changes in Income and Prices Affect Consumption

Choices

6.3 Behavioral Economics: An Alternative Framework for Consumer Choice

•       Propose decisions that maximize utility

7.2 Production in the Short Run

7.3 Costs in the Short Run

7.4 Production in the Long Run

7.5 Costs in the Long Run

•       Understand the relationship between cost and revenue

•       Understand the concept of a production function

•       Differentiate between the different types of inputs or factors in a production function

•       Differentiate between fixed and variable inputs

•       Differentiate between production in the short run and in the long run

•       Differentiate between total and marginal product

•       Understand the concept of diminishing marginal productivity

•       Understand the relationship between production and costs

•       Understand that every factor of production has a corresponding factor price

•       Analyze short-run costs in terms of total cost, fixed cost, variable cost, marginal cost, and average cost

•       Calculate average profit

•       Evaluate patterns of costs to determine potential profit

•       Understand how long run production differs from short run production.

•       Calculate long run total cost

•       Identify economies of scale, diseconomies of scale, and constant returns to scale

•       Interpret graphs of long-run average cost curves and shortrun average cost curves

8.2 How Perfectly Competitive Firms Make Output Decisions

8.3 Entry and Exit Decisions in the Long Run

8.4 Efficiency in Perfectly Competitive Markets

•       Discuss how perfectly competitive firms react in the short run and in the long run

•       Calculate profits by comparing total revenue and total cost

•       Identify profits and losses with the average cost curve

•       Explain the shutdown point

•       Determine the price at which a firm should continue producing in the short run

•       Explain how entry and exit lead to zero profits in the long run

•       Discuss the long-run adjustment process

•       Apply concepts of productive efficiency and allocative efficiency to perfectly competitive markets

•       Compare the model of perfect competition to real-world markets

9.2 How a Profit-Maximizing Monopoly Chooses Output and Price

•       Describe how a monopolistic competitor chooses price and quantity

•       Discuss entry, exit, and efficiency as they pertain to monopolistic competition

•       Analyze how advertising can impact monopolistic competition

•       Explain why and how oligopolies exist

•       Contrast collusion and competition

•       Interpret and analyze the prisoner’s dilemma diagram

•       Evaluate the tradeoffs of imperfect competition

11.2 Regulating Anticompetitive Behavior

11.3 Regulating Natural Monopolies

11.4 The Great Deregulation Experiment

•       Calculate concentration ratios

•       Calculate the Herfindahl-Hirschman Index (HHI)

•       Evaluate methods of antitrust regulation

•       Analyze restrictive practices

•       Explain tying sales, bundling, and predatory pricing

•       Evaluate a real-world situation of possible anticompetitive and restrictive practices

•       Evaluate the appropriate competition policy for a natural monopoly

•       Interpret a graph of regulatory choices

•       Contrast cost-plus and price cap regulation

•       Evaluate the effectiveness of price regulation and antitrust policy

•       Explain regulatory capture and its significance

12.2 Command-and-Control Regulation

12.3 Market-Oriented Environmental Tools

12.4 The Benefits and Costs of U.S. Environmental Laws

12.5 International Environmental Issues

12.6 The Tradeoff between Economic Output and Environmental Protection

•       Identify equilibrium price and quantity

•       Evaluate how firms can contribute to market failure

13.2 How Governments Can Encourage Innovation 13.3 Public Goods

•       Explain the difference between private benefits and social benefits and give examples of each

•       Calculate and analyze rates of return

•       Explain the effects of intellectual property rights on social and private rates of return

•       Identify three U.S. Government policies and explain how they encourage innovation

•       Identify a public good using nonexcludable and non-rival as criteria

•       Explain the free rider problem

•       Identify several sources of public goods

14.2 Wages and Employment in an Imperfectly Competitive Labor

Market

14.3 Market Power on the Supply Side of Labor Markets: Unions

14.4 Bilateral Monopoly

14.5 Employment Discrimination

•       Describe the demand for labor in imperfectly competitive output markets

•       Explain what determines the going market wage rate

•       Define monopsony power

•       Explain how imperfectly competitive labor markets determine wages and employment, where employers have market power

•       Explain the concept of labor unions, including membership levels and wages

•       Evaluate arguments for and against labor unions

•       Analyze reasons for the decline in U.S. union membership

•       Explain how firms determine wages and employment when a specific labor market combines a union and a monopsony

•       Analyze earnings gaps based on race and gender

•       Explain the impact of discrimination in a competitive market

•       Identify U.S. public policies designed to reduce discrimination

•       Explain how immigration affects labor market outcomes

15.2 The Poverty Trap

15.3 The Safety Net

15.4 Income Inequality: Measurement and Causes

15.5 Government Policies to Reduce Income Inequality

•       Analyze the U.S. poverty rate over time, noting its prevalence among different groups of citizens

•       Explain the poverty trap, noting how government programs impact it

•       Identify potential issues in government programs that seek to reduce poverty

•       Calculate a budget constraint line that represents the poverty trap

•       Identify the antipoverty government programs that comprise the safety net

•       Explain the the safety net programs' primary goals and how these programs have changed over time

•       Discuss the complexities of these safety net programs and why they can be controversial

16.2 Insurance and Imperfect Information

•       Evaluate the role of advertisements in creating imperfect information

•       Identify ways to reduce the risk of imperfect information

•       Explain how imperfect information can affect price, quantity, and quality

•       Explain how insurance works

•       Identify and evaluate various forms of government and social insurance

•       Discuss the problems caused by moral hazard and adverse selection

•       Analyze the impact of government regulation of insurance

17.2 How Households Supply Financial Capital

17.3 How to Accumulate Personal Wealth

•       Discuss the purpose and process of borrowing, bonds, and corporate stock

•       Explain how firms choose between sources of financial capital

•       Show the relationship between savers, banks, and borrowers

•       Calculate bond yield

•       Contrast bonds, stocks, mutual funds, and assets

•       Explain the tradeoffs between return and risk

•       Explain the random walk theory

•       Calculate simple and compound interest

18.2 Special Interest Politics

18.3 Flaws in the Democratic System of Government

•       Evaluate the impact of election expenses

•       Explain how special interest groups and lobbyists can influence campaigns and elections

•       Describe pork-barrel spending and logrolling

•       Assess the median voter theory

•       Explain the voting cycle

•       Analyze the interrelationship between markets and government

19.2 Adjusting Nominal Values to Real Values

19.3 Tracking Real GDP over Time

19.4 Comparing GDP among Countries

19.5 How Well GDP Measures the Well-Being of Society

•       Evaluate how economists measure gross domestic product (GDP)

•       Contrast and calculate GDP, net exports, and net national product

•       Contrast nominal GDP and real GDP

•       Explain GDP deflator

•       Calculate real GDP based on nominal GDP values

•       Explain recessions, depressions, peaks, and troughs

•       Evaluate the importance of tracking real GDP over time

•       Explain how we can use GDP to compare the economic welfare of different nations

•       Calculate the conversion of GDP to a common currency by using exchange rates

•       Calculate GDP per capita using population data

•       Discuss how productivity influences the standard of living

•       Explain the limitations of GDP as a measure of the standard of living

•       Analyze the relationship between GDP data and fluctuations in the standard of living

20.3 Components of Economic Growth

20.4 Economic Convergence

•       Analyze the influence of public policies on an economy's long-run economic growth

•       Identify the role of labor productivity in promoting economic growth

•       Analyze the sources of economic growth using the aggregate production function

•       Measure an economy’s rate of productivity growth

•       Evaluate the power of sustained growth

•       Discuss the components of economic growth, including physical capital, human capital, and technology

•       Explain capital deepening and its significance

•       Analyze the methods employed in economic growth accounting studies

•       Identify factors that contribute to a healthy climate for economic growth

•       Explain economic convergence

•       Analyze various arguments for and against economic convergence

•       Evaluate the speed of economic convergence between high-income countries and the rest of the world

21.2 Patterns of Unemployment

21.3 What Causes Changes in Unemployment over the Short Run

21.4 What Causes Changes in Unemployment over the Long Run

•       Explain hidden unemployment and what it means to be in or out of the labor force

•       Evaluate the collection and interpretation of unemployment data

•       Explain historical patterns of unemployment in the U.S.

•       Identify trends of unemployment based on demographics

•       Evaluate global unemployment rates

•       Analyze cyclical unemployment

•       Explain the relationship between sticky wages and employment using various economic arguments

•       Apply supply and demand models to unemployment and wages

•       Explain frictional and structural unemployment

22.2 How to Measure Changes in the Cost of Living

22.3 How the U.S. and Other Countries Experience Inflation

22.4 The Confusion Over Inflation

22.5 Indexing and Its Limitations

•       Explain and use index numbers and base years when simplifying the total quantity spent over a year for products

•       Calculate inflation rates using index numbers

•       Use the Consumer Price Index (CPI) to calculate U.S.

inflation rates

•       Identify several ways the Bureau of Labor Statistics avoids biases in the Consumer Price Index (CPI)

•       Differentiate among the Consumer Price Index (CPI), the Producer Price Index (PPI), the International Price Index, the Employment Cost Index, and the GDP deflator.

•       Identify patterns of inflation for the United States using data from the Consumer Price Index

•       Identify patterns of inflation on an international level

•       Explain how inflation can cause redistributions of purchasing power

•       Identify ways inflation can blur the perception of supply and demand

•       Explain the economic benefits and challenges of inflation

•       Explain the relationship between indexing and inflation

•       Identify three ways the government can control inflation through macroeconomic policy

23.2 Trade Balances in Historical and International Context

23.3 Trade Balances and Flows of Financial Capital

23.4 The National Saving and Investment Identity

23.5 The Pros and Cons of Trade Deficits and Surpluses

23.6 The Difference between Level of Trade and the Trade Balance

•       Identify components of the U.S. current account balance

24.2 Building a Model of Aggregate Demand and Aggregate Supply

24.3 Shifts in Aggregate Supply

24.4 Shifts in Aggregate Demand

24.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation

24.6 Keynes’ Law and Say’s Law in the AD/AS Model

•       Explain Keynes’ Law and understand why it primarily applies in the short run

•       Explain the aggregate supply curve and how it relates to real GDP and potential GDP

•       Explain the aggregate demand curve and how it is influenced by price levels

•       Interpret the aggregate demand/aggregate supply model

25.2 The Building Blocks of Keynesian Analysis

25.3 The Phillips Curve

25.4 The Keynesian Perspective on Market Forces

•       Recognize the Keynesian AD/AS model

•       Identify the determining factors of both consumption expenditure and investment expenditure

•       Analyze the factors that determine government spending and net exports

•       Evaluate the Keynesian view of recessions through an understanding of sticky wages and prices and the importance of aggregate demand

•       Explain the coordination argument, menu costs, and macroeconomic externality

•       Analyze the impact of the expenditure multiplier

•       Explain the Phillips curve, noting its impact on the theories of Keynesian economics

26.2 The Policy Implications of the Neoclassical Perspective

26.3 Balancing Keynesian and Neoclassical Models

•       Analyze the role of flexible prices

•       Interpret a neoclassical model of aggregate demand and aggregate supply

•       Evaluate different ways for measuring the speed of macroeconomic adjustment

•       Discuss why and how economists measure inflation expectations

•       Analyze the impacts of fiscal and monetary policy on aggregate supply and aggregate demand

•       Explain the neoclassical Phillips curve, noting its tradeoff between inflation and unemployment

•       Identify clear distinctions between neoclassical economics and Keynesian economics

•       Evaluate how neoclassical economists and Keynesian economists react to recessions

•       Analyze the interrelationship between the neoclassical and Keynesian economic models

27.2 Measuring Money: Currency, M1, and M2

27.3 The Role of Banks

27.4 How Banks Create Money

•       Contrast commodity money and fiat money

•       Contrast M1 money supply and M2 money supply

•       Classify monies as M1 money supply or M2 money supply

•       Explain how banks act as intermediaries between savers and borrowers

•       Evaluate the relationship between banks, savings and loans, and credit unions

•       Analyze the causes of bankruptcy and recessions

28.2 Bank Regulation

28.3 How a Central Bank Executes Monetary Policy

28.4 Monetary Policy and Economic Outcomes

28.5 Pitfalls for Monetary Policy

•       Discuss how central banks impact monetary policy, promote financial stability, and provide banking services

•       Discuss the relationship between bank regulation and monetary policy

•       Explain bank supervision

•       Explain how deposit insurance and lender of last resort are two strategies to protect against bank runs

•       Explain the reason for open market operations

•       Evaluate reserve requirements and discount rates

•       Interpret and show bank activity through balance sheets

•       Contrast expansionary monetary policy and contractionary monetary policy

•       Explain how monetary policy impacts interest rates and aggregate demand

•       Evaluate Federal Reserve decisions over the last forty years

•       Explain the significance of quantitative easing (QE)

•       Analyze whether monetary policy decisions should be made more democratically

•       Calculate the velocity of money

•       Evaluate the central bank’s influence on inflation, unemployment, asset bubbles, and leverage cycles

•       Calculate the effects of monetary stimulus

29.2 Demand and Supply Shifts in Foreign Exchange Markets

29.3 Macroeconomic Effects of Exchange Rates

29.4 Exchange Rate Policies

•       Describe different types of investments like foreign direct investments (FDI), portfolio investments, and hedging

•       Explain how appreciating or depreciating currency affects exchange rates

30.2 Taxation

30.3 Federal Deficits and the National Debt

30.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation

30.5 Automatic Stabilizers

30.6 Practical Problems with Discretionary Fiscal Policy

30.7 The Question of a Balanced Budget

•       Explain the differences between the U.S. federal budget, and state and local budgets

•       Differentiate among a regressive tax, a proportional tax, and a progressive tax

•       Identify major revenue sources for the U.S. federal budget

•       Explain the U.S. federal budget in terms of annual debt and accumulated debt

•       Understand how economic growth or decline can influence a budget surplus or budget deficit

•       Explain how expansionary fiscal policy can shift aggregate demand and influence the economy

•       Explain how contractionary fiscal policy can shift aggregate demand and influence the economy

•       Describe how the federal government can use discretionary fiscal policy to stabilize the economy

•       Identify examples of automatic stabilizers

•       Understand how a government can use standardized employment budget to identify automatic stabilizers

•       Understand how fiscal policy and monetary policy are interconnected

Trade Balance

31.2 Fiscal Policy and the Trade Balance

31.3 How Government Borrowing Affects Private Saving

31.4 Fiscal Policy, Investment, and Economic Growth

•       Evaluate the role of budget surpluses and trade surpluses in national saving and investment identity

•       Discuss twin deficits as they related to budget and trade deficit

•       Explain the relationship between budget deficits and exchange rates

•       Explain the relationship between budget deficits and inflation

•       Identify causes of recessions

•       Apply Ricardian equivalence to evaluate how government borrowing affects private saving

•       Interpret a graphic representation of Ricardian equivalence

•       Explain crowding out and its effect on physical capital investment

•       Explain the relationship between budget deficits and interest rates

•       Identify why economic growth is tied to investments in physical capital, human capital, and technology

32.2 Improving Countries’ Standards of Living

32.3 Causes of Unemployment around the World

32.4 Causes of Inflation in Various Countries and Regions 32.5 Balance of Trade Concerns

•       Identify what classifies a country as low-income, middleincome, or high-income

33.2 What Happens When a Country Has an Absolute Advantage in All Goods

33.3 Intra-industry Trade between Similar Economies

33.4 The Benefits of Reducing Barriers to International Trade

•       Explain the gains of trade created when a country specializes

•       Show the relationship between production costs and comparative advantage

•       Identify situations of mutually beneficial trade

•       Identify trade benefits by considering opportunity costs

•       Identify at least two advantages of intra-industry trading

•       Explain the relationship between economies of scale and intra-industry trade

•       Explain tariffs as barriers to trade

•       Identify at least two benefits of reducing barriers to international trade

Producers

34.2 International Trade and Its Effects on Jobs, Wages, and

Working Conditions

34.3 Arguments in Support of Restricting Imports

34.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally

34.5 The Tradeoffs of Trade Policy

•       Analyze protectionism through concepts of demand and supply, noting its effects on equilibrium

•       Calculate the effects of trade barriers

•       Discuss how international trade influences the job market

•       Analyze the opportunity cost of protectionism

•       Explain how international trade impacts wages, labor standards, and working conditions

•       Explain and analyze various arguments that are in support of restricting imports, including the infant industry argument, the anti-dumping argument, the environmental protection argument, the unsafe consumer products argument, and the national interest argument

•       Explain dumping and race to the bottom

•       Evaluate the significance of countries’ perceptions on the benefits of growing trade

•       Explain the origin and role of the World Trade

Organization (WTO) and General Agreement on Tariffs and Trade (GATT)

•       Discuss the significance and provide examples of regional trading agreements

•       Analyze trade policy at the national level

•       Evaluate long-term trends in barriers to trade

•       Assess the complexity of international trade

•       Discuss why a market-oriented economy is so affected by international trade

•       Explain disruptive market change