1. AP Macroeconomics 2015 The Final Chapter

2. AP Macroeconomics – Fall 2014 WELCOME WILDCAT CLASS OF 2015

3. Class Info  Class website – www.villamagna.wikispaces.com www.villamagna.wikispaces.com  Click on AP Macroeconomics Home Page (on left side of main page)  Grades 60% Tests 20% Assessments 20% Quizzes

4. Class Info  REDO Policy One failing major grade One failing quiz No Assessments 70 is max grade for a REDO

5. AP Macroeconomics  Class notes notebook  Folder or Binder to keep handouts  Copy of Robert Reich’s Aftershock (info on home page)

6. Economics IQ – TRUE OR FALSE  We are currently in a recession  The president is primarily responsible for the ups and downs of the U.S. economy  Unemployment is currently at 6.1%  The annual inflation rate in the U.S. (rise in prices) is about 5%

7. Economics IQ – TRUE OR FALSE  U.S. budget deficits have increased every year Obama has been president  The value of U.S. imports far exceeds the value of our exports  One dollar buys about 1 Japanese Yen  President Obama’s economic policies have been a failure

8. The Economic Way of Thinking  The influence of economics is found everywhere around us

9. The Economic Way of Thinking  It’s in our clothes

10. The Economic Way of Thinking  It’s in our workplace

11. The Economic Way of Thinking It’s in our politics

12. The Economic Way of Thinking  Economics is the study of limited resources and unlimited wants – the study of scarcity!  What resources are limited? ALL OF THEM!!! Time Money

13. The Economic Way of Thinking Clean water and air Employers Employees Texans tickets

14. The Economic Way of Thinking  The resources used to produce goods and services are called the FACTORS OF PRODUCTION (FOPs)  LAND (Natural Resources)  LABOR (Human Resources/Human Capital)  CAPITAL (Machinery, buildings, computers, etc.)  ENTREPRENEURSHIP (Risk-taking, innovation)

15. Mark Zuckerberg  28 years old  Was worth $19.1 billion when stock IPO was at $38

16. The Economic Way of Thinking  This Scarcity Reality forces people, businesses, governments, and societies to make CHOICES!

17. The Economics Way of Thinking  When we make choices on how to utilize scarce resources we are, in essence, making an economic decision

18. The Economics Way of Thinking  Do I go to bed or stay up and watch TV?  Do I come to class or sleep in late?  Do I spend $25 on a nice dinner or do I save the money?

19. OPPORTUNITY COST  The value of the next best thing you have given up when you make an economic choice

20. OPPORTUNITY COST  What is the opportunity cost of going out to the movies on the night before a big Eco test?

21. OPPORTUNITY COST  What is the opportunity cost of paying $8.99 a month for Netflix?

22. The Economic Way of Thinking #1 - Every economic decision has a cost! Every action costs someone money, time, effort, or lost opportunities to do something else

23. The Economic Way of Thinking #2 - We make economic choices that we think are in our best interest! These decisions are designed to increase our UTILITY – the satisfaction or happiness we get from consuming a good or service We usually engage in cost- benefit analysis

24. Cost-Benefit Analysis  When we consider the costs and benefits when making an economic decision  Comparing what you gain vs. what you give up

25. Cost-Benefit Analysis  What do you gain from eating at each of these restaurants?  What do you give up?

26. Economic Question  Is there ever a time when cost-benefit analysis leads a person to the conclusion that going to college is NOT in their best economic interest?

27.  Texas A&M University Tuition $8419 for 2012/13  If tuition increases 6% a year… Next year: 8924.14 9459.59 10027.16  Final Cost (Tuition Only)- $36,829.89  Living Expenses- $1200/mo. *48- $57,600  TOTAL - $94,429.89

28. The Economic Way of Thinking #3 - Incentives Matter! Why will most of you take fairly detailed notes on the economic concepts from the text chapters? Why do some workers volunteer to work on holidays?

29. The Economic Way of Thinking #4 - Economic thinking is marginal thinking! Marginal means additional What are the Marginal Costs and Marginal Benefits of studying a second (additional) hour for a test? What are the Marginal Costs and Marginal Benefits of raising personal income taxes on the wealthiest Americans?

30. Microeconomics  A look at individual economic decisions (consumers, businesses, and workers (labor))  Business profit and loss  Supply and Demand in individual markets

31. Macroeconomics  Examining economic activity and decision making on a national scale  Inflation (price level)  Unemployment  Gross Domestic Product (GDP)  Aggregate Supply and Aggregate Demand

32. Macroeconomics  Attempts to understand economic hard times and find ways to prevent them  Became a defined and concentrated field of study as a result of The Great Depression

33. Macroeconomic Policy  Prevent or minimize the impact of recessions  Promote economic growth without high levels of inflation

34. Some more basic economic terms  Goods – tangible things of value  Services – intangible things of value  Products – goods and services  Capital – the factories, equipment, and machinery used to produce goods and services

35. Some more basic economic terms  Consumer Goods – goods produced to satisfy human wants  Capital Goods – goods produced to create consumer goods  When is a computer a consumer good?  When is a computer a capital good?

36. The Production Possibilities Frontier (PPF)  A graphic representation of the scarcity reality  Also shows opportunity cost, efficiency, and economic growth

37. PPFs  Constant Opportunity Costs  Increasing Opportunity Costs

38. Constant Opportunity Costs

39. Under-utilization Unattainable

41. Economic Growth  A sustained rise in aggregate output  Two general sources Increase in amount and quality of resources Technological innovations