IB Economics Senior Year

 

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Course Syllabus: IB Economics Senior Year Syllabus

KHAN Academy AP Macroeconomics 

Jason Welker Economic Classroom

Boundless Economics

Econowaugh AP

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Section 4.1 Economic development   

 Section 4.1 Economic Development & 4.2 Measuring Development Vocabulary     

Read Chapter 26 in the Pearson Textbook

Essential Question(s):

The nature of economic growth and economic development

1. Distinguish between economic growth and economic development.
2. Explain the multidimensional nature of economic development in terms of reducing widespread poverty, raising living standards, reducing income inequalities and increasing employment opportunities.
3. Explain that the most important sources of economic growth in economically less developed countries include increases in quantities of physical capital and human capital, the development and use of new technologies that are appropriate to the conditions of the economically less developed countries, and institutional changes.
4. Discuss the relationship between economic growth and economic development, noting that some limited economic development is possible in the absence of economic growth, but that over the long term economic growth is usually necessary for economic development (however, it should be understood that under certain circumstances economic growth may not lead to economic development).
5. Explain, using examples, that economically less developed countries share certain common characteristics (noting that it is dangerous to generalize as there are many exceptions in each case), including low levels of GDP per capita, high levels of poverty, relatively large agricultural sectors, large urban informal sectors and high birth rates.
6. Explain that in some countries there may be communities caught in poverty trap (poverty cycle) where poor communities are unable to invest in physical, human and natural capital due to low or no savings; poverty is therefore transmitted from generation to generation, and there is a need for intervention to break out of the cycle.
7. Explain, using examples, that economically less developed countries differ enormously from each other in terms of a variety of factors, including resource endowments, climate, history (colonial or otherwise), political systems and degree of political stability.
8. Outline the current status of international development goals, including the Millennium Development Goals.

Section 4.2 Measuring development

Measurement methods

1. Distinguish between GDP per capita figures and GNI per capita figures.
2. Compare and contrast the GDP per capita figures and the GNI per capita figures for economically more developed countries and economically less developed countries.
3. Distinguish between GDP per capita figures and GDP per capita figures at purchasing power parity (PPP) exchange rates.
4. Compare and contrast GDP per capita figures and GDP per capita figures at purchasing power parity (PPP) exchange rates for economically more developed countries and economically less developed countries.
5. Compare and contrast two health indicators for economically more developed countries and  economically less developed countries.
6. Compare and contrast two education indicators for economically more developed countries and  economically less developed countries.
7. Explain that composite indicators include more than one measure and so are considered to be better indicators of economic development.
8. Explain the measures that make up the Human Development Index (HDI).
9. Compare and contrast the HDI figures for economically more developed countries and economically less developed countries.
10. Explain why a country’s GDP/ GNI per capita global ranking may be lower, or higher, than its HDI  global ranking.

                                                                                                                            

Section 3.4 Economic integration & 3.5 Terms of trade Vocabulary 

Read Chapter 24 & 25 in the Pearson Textbook

Section 3.4 Economic Integration

Essential Question(s):

Forms of economic integration

1. Distinguish between bilateral and multilateral (WTO) trade agreements.
2. Explain that preferential trade agreements give preferential access to certain products from certain countries by reducing or eliminating tariffs, or by other agreements relating to trade.
3. Distinguish between a free trade area, a customs union and a common market.
4. Explain that economic integration will increase competition among producers within the trading bloc.
5. Compare and contrast the different types of trading blocs.
6. Explain the concepts of trade creation and trade diversion in a customs union.
7. Explain that different forms of economic integration allow member countries to gain from economies of scale.
8. Explain that a monetary union is a common market with a common currency and a common central bank.
9. Discuss the possible advantages and disadvantages of a monetary union for its members.

Section 3.5 Terms of trade (HL only)

The meaning of the terms of trade

1. Explain the meaning of the terms of trade.
2. Explain how the terms of trade are measured.
3. Distinguish between an improvement and deterioration in the terms of trade.
4. Calculate the terms of trade using the equation: Index of average export prices/index of average import prices x 100.
5. Explain that the terms of trade may change in the short term due to changes in demand conditions for exports and imports, changes in global supply of key inputs (such as oil), changes in relative inflation rates and changes in relative exchange rates.
6. Explain that the terms of trade may change in the long term due to changes in world income levels, changes in productivity within the country and technological developments.
7. Explain how changes in the terms of trade in the long term may result in a global redistribution of income.
8. Examine the effects of changes in the terms of trade on a country’s current account, using the concepts of price elasticity of demand for exports and imports.
9. Explain the impacts of short-term fluctuations and long-term deterioration in the terms of trade of economically less developed countries that specialize in primary commodities, using the concepts of price elasticity of demand and supply for primary products and income elasticity of demand.                                                                                              

                                                                                           

                                                           

Section 3.3 The balance of payments

Section 3.3 Vocabulary 

Read Chapter 23 in the Pearson Textbook

Essential Question(s):

The structure of the balance of payments

1. Outline the role of the balance of payments
2. Distinguish between debit items and credit items in the balance of payments.
3. Explain the four components of the current account, specifically the balance of trade in goods, the balance of trade in services, income and current transfers.
4. Distinguish between a current account deficit and a current account surplus
5. Explain the two components of the capital account, specifically capital transfers and transaction in non-produced, non-financial assets.
6. Explain the three main components of the financial account, specifically, direct investment, portfolio investment and reserve assets.
7. Calculate elements of the balance of payments from a set of data.
8. Explain that the current account balance is equal to the sum of the capital account and financial account balances (see the appendix, “The balance of payments”).
9. Examine how the current account and the financial account are interdependent.

Current account deficits

10. Explain why a deficit in the current account of the balance of payments may result in downward pressure on the exchange rate of the currency.
11. Discuss the implications of a persistent current account deficit, referring to factors including foreign ownership of domestic assets, exchange rates, interest rates, indebtedness, international credit ratings and demand management.
12. Explain the methods that a government can use to correct a persistent current account deficit, including expenditure switching policies, expenditure reducing policies and supply-side policies, to increase competitiveness.
13. Evaluate the effectiveness of the policies to correct a persistent current account deficit.
14. State the Marshall-Lerner condition.
15. Apply the Marshall-Lerner condition to the effect of depreciation/devaluation on the current account.
16. Explain the J-curve effect, with reference to the Marshall- Lerner condition.

Current account surpluses

17. Explain why a surplus in the current account of the balance of payments may result in upward pressure on the exchange rate of the currency.
18. Discuss the possible consequences of a rising current account surplus, including lower domestic consumption and investment, as well as the appreciation of the domestic currency and reduced export competitiveness.                                                                 

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Section 3.2 Exchange rates     

Section 3.2 Vocabulary 

Read Chapter 22 in the Pearson Textbook

Essential Question(s):

        A.    Explain the difference between nominal and real exchange rates

        B.    Explain the concept of purchasing power parity.

Freely floating exchange rates

1. Explain that the value of an exchange rate in a floating system is determined by the demand for, and supply of, a currency.
2. Draw a diagram to show determination of exchange rates in a floating exchange rate system.
3. Calculate the value of one currency in terms of another currency.
4. Calculate the exchange rate for linear demand and supply functions.
5. Plot demand and supply curves for a currency from linear functions and identify the equilibrium exchange rate.
6. Using exchange rates, calculate the price of a good in different currencies.
7. Explain the factors that lead to changes in currency demand and supply, including foreign demand for a country’s exports, domestic demand for imports, relative interest rates, relative inflation rates, investment from overseas in a country’s firms (foreign direct investment and portfolio investment) and speculation.
8. Distinguish between a depreciation of the currency and an appreciation of the currency.
9. Draw diagrams to show changes in the demand for, and supply of, a currency.
10. Calculate the changes in the value of a currency from a set of data.
11. Evaluate the possible economic consequences of a change in the value of a currency, including the effects on a country’s inflation rate, employment, economic growth and current account balance.

Government intervention

12. Describe a fixed exchange rate system involving commitment to a single fixed rate.
13. Distinguish between a devaluation of a currency and a revaluation of a currency.
14. Explain, using a diagram, how a fixed exchange rate is maintained.
15. Explain how a managed exchange rate operates, with reference to the fact that there is a periodic government intervention to influence the value of an exchange rate.
16. Examine the possible consequences of overvalued and undervalued currencies.
17. Compare and contrast a fixed exchange rate system with a floating exchange rate system, with reference to factors including the degree of certainty for stakeholders, ease of adjustment, the role of international reserves in the form of foreign currencies and flexibility offered to policy makers.

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Section 3.1 International trade  Essential Question(s):

Section 3.1 Vocabulary

Trade Ruler

Read chapter 20 & 21 in the Pearson Economic Textbook

Free trade

1. Explain that gains from trade include lower prices for consumers, greater choice for consumers, and the ability of producers to benefit from economies of scale, the ability to acquire needed resources, a more efficient allocation of resources, increased competition, and a source of foreign exchange.
2. Explain the theory of absolute advantage.
3. Explain, using a diagram, the gains from trade arising from a country’s absolute advantage in the production of a good.
4. Explain the theory of comparative advantage 
5. Describe the sources of comparative advantage, including the differences between countries in factor endowments and the levels of technology.
6. Draw a diagram to show comparative advantage.
7. Calculate opportunity costs from a set of data in order to identify comparative advantage.
8. Draw a diagram to illustrate comparative advantage from a set of data.
9. Discuss the real-world relevance and limitations of the theory of comparative advantage, considering factors including the assumptions on which it rests, and the costs and benefits of specialization (a full discussion must take into account arguments in favor and against free trade and protection—see below).
10. Describe the objectives and functions of the WTO.

Restrictions on free trade: Trade protection

1. Explain, using a tariff diagram, the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers and the government.
2. Calculate from diagrams the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers and the government.
3. Explain, using a diagram, the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
4. Calculate from diagrams the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
5. Explain, using a diagram, the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
6. Calculate from diagrams the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
7. Describe administrative barriers that may be used as a means of protection.
8. Evaluate the effect of different types of trade protection.
9. Discuss the arguments in favor of trade protection, including the protection of domestic jobs, national security, protection of infant industries, the maintenance of health, safety and environmental standards, anti-dumping and unfair competition, a means of overcoming a balance of payments deficit and a source of government revenue.

1. Discuss the arguments against trade protection, including a misallocation of resources, the danger of retaliation and “trade wars”, and the potential for corruption, increased costs of production due to lack of competition, higher prices for domestic consumers, and increased costs of imported factors of production and reduced export competitiveness.

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Section 2.4 Fiscal Policy 2.5 Monetary policy 2.6 Supply-side policies

Essential Question(s):

  

Read Chapters 17,18,19 in (Pearson)

Section 2.4, 2.5 & 2.6 Vocabulary

2.4 Fiscal Policy

Federal Budget Challenge

1. Explain that the government earns revenue primarily from taxes (direct and  indirect), as well as from the sale of goods and services and the sale of state-owned (government owned) enterprises.
2. Explain that government spending can be classified into current expenditures, capital expenditures and transfer payments, providing examples of each.
3. Distinguish between a budget deficit, a budget surplus and a balanced budget.
4. Explain the relationship between budget deficits/ surpluses and the public (government) debt.
5. Explain how changes in the level of government expenditure and/or taxes can influence the level of aggregate demand in an economy.
6. Explain the mechanism through which expansionary fiscal policy can help an economy close a deflationary (recessionary) gap.
7. Construct a diagram to show the potential effects of expansionary fiscal policy, outlining the importance of the shape of the aggregate supply curve.
8. Explain the mechanism through which contractionary fiscal policy can help an economy close an inflationary gap.
9. Construct a diagram to show the potential effects of contractionary fiscal policy, outlining the importance of the shape of the aggregate supply curve.
10. Explain how factors including the progressive tax system and unemployment benefits, which are influenced by the level of economic activity and national income, automatically help stabilize short-term fluctuations.
11. Evaluate the view that fiscal policy can be used to promote long-term economic growth (increases in potential output) indirectly by creating an economic environment that is favorable to private investment, and directly through government spending on physical capital goods and human capital formation, as well as provision of incentives for firms to invest.
12. Evaluate the effectiveness of fiscal policy through consideration of factors including the ability to target sectors of the economy, the direct impact on aggregate demand, the effectiveness of promoting economic activity in a recession, time lags, political constraints, crowding out, and the inability to deal with supply-side causes of instability.

2.5 Monetary policies

Chair the Fed: A monetary policy game 

13. Describe the role of central banks as regulators of commercial banks and bankers to governments.
14. Explain that central banks are usually made responsible for interest rates and exchange rates in order to achieve macroeconomic objectives.
15. Explain, using a demand and supply of money diagram, how equilibrium interest rates are determined, outlining the role of the central bank in influencing the supply of money.
16. Explain how changes in interest rates can influence the level of aggregate demand in an economy.
17. Explain the three tools that a central bank, in principle, can be used to control the money supply and interest rates.
18. Explain the mechanism through which easy (expansionary) monetary policy can help an economy close a deflationary (recessionary) gap.
19. Construct a diagram to show the potential effects of easy (expansionary) monetary policy, outlining the importance of the shape of the aggregate supply curve.
20. Explain the mechanism through which tight (contractionary) monetary policy can help an economy close an inflationary gap.
21. Construct a diagram to show the potential effects of tight (contractionary) monetary policy, outlining the importance of the shape of the aggregate supply curve.
22. Explain that central banks of certain countries, rather than focusing on the maintenance of both full employment and a low rate of inflation, are guided in their monetary policy by the objective to achieve an explicit or implicit inflation rate target.
23. Evaluate the effectiveness of monetary policy through consideration of factors including the independence of the central bank, the ability to adjust interest rates incrementally, the ability to implement changes in interest rates relatively quickly, time lags, limited effectiveness in increasing aggregate demand if the economy is in deep recession and conflict among government economic objectives.

2.6 Supply-side policies

24. Explain that supply-side policies aim at positively affecting the production side of an economy by improving the institutional framework and the capacity to produce (that is, by changing the quantity and/or quality of factors of production).
25. State that supply-side policy may be market-based or interventionist and that in either case they aim to shift the LRAS curve to the right, achieving growth in potential output.

Interventionist supply-side policies

26. Explain how investment in education and training will raise the levels of human capital and have a short-term impact on aggregate demand, but more importantly will increase LRAS.
27. Explain how policies that encourage research and development will have a short-term impact on aggregate demand, but more importantly will result in new technologies and will increase LRAS.
28. Explain how increased and improved infrastructure will have a short-term impact on aggregate demand, but more importantly will increase LRAS.
29. Explain that targeting specific industries through policies including tax cuts, tax allowances and subsidized lending promotes growth in key areas of the economy and will have a short-term impact on aggregate demand but, more importantly,  will increase LRAS.

Market-base supply-side policies

30. Explain how factors including deregulation, privatization, trade liberalization and antimonopoly regulation are used to encourage competition.
31. Explain how factors including reducing the power of labor unions, reducing unemployment benefits and abolishing minimum wages are used to make the labor market more flexible (more responsive to supply and demand).
32. Explain how factors including personal income tax cuts are used to increase the incentive to work, and how cuts in business tax and capital gains tax are used to increase the incentive to invest.
33. Evaluate the effectiveness of supply-side policies through consideration of factors including time lags, the ability to create employment, the ability to reduce inflationary pressure, the impact on economic growth, the impact on the government budget, the effect on equity, and the effect on the environment.

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2.3 Macroeconomic Objectives: Low unemployment

Section 2.3 Vocabulary

 Read Chapter 13, 14 & 16 Person Textbook

1.    Define the term unemployment.

2.    Explain how the unemployment rate is calculated.

3.    Calculate the unemployment rate from a set of data.

4.    Explain the difficulties in measuring unemployment, including the existence of hidden unemployment, the existence of underemployment, and the fact that it is an average and therefore ignores regional, ethnic, age and gender disparities.

5.    Discuss possible economic consequences of unemployment, including a loss of GDP, loss of tax revenue, increased cost of unemployment benefits, loss of income for individuals, and greater disparities in the distribution of income.

6.    Discuss possible personal and social consequences of unemployment, including increased crime rates, increased stress levels, increased indebtedness, homelessness and family breakdown.

7.    Describe, using examples, the meaning of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

8.    Distinguish between the causes of frictional, structural, seasonal and cyclical (demand-deficient) unemployment.

9.    Explain, using a diagram, that cyclical unemployment is caused by a fall in aggregate demand.

10.  Explain, using a diagram, that structural unemployment is caused by changes in the demand for particular labor skills, changes in the geographical location of industries, and labor market rigidities.

11.  Evaluate government policies to deal with the different types of unemployment.

12.  Explain that the natural rate of unemployment is the rate of unemployment that exists when the economy is producing at the full employment level of output.

2.3 Macroeconomic Objectives: Low and stable rate of inflation

13.  Distinguish between inflation, disinflation and deflation.

14.  Explain that inflation and deflation are typically measured by calculating a consumer price index (CPI), which measures the change in prices of a basket of goods and services consumed by the average household.

15.  Construct a weighted price index, using a set of data provided.

16.  Calculate the inflation rate from a set of data.

17.  Explain that different income earners may experience a different rate of inflation when their pattern of consumption is not accurately reflected by the CPI.

18.  Explain that inflation figures may not accurately reflect changes in consumption patterns and the quality of the products purchased.

19.  Explain that economists measure a core/underlying rate of inflation to eliminate the effect of sudden swings in the prices of food and oil, for example.

20.  Explain that a producer price index measuring changes in the prices of factors of production may be useful in predicting future inflation.

21.  Discuss the possible consequences of a high inflation rate, including greater uncertainty, redistributive effects, less saving, and the damage to export competitiveness.

22.  Discuss the possible consequences of deflation, including high levels of cyclical unemployment and bankruptcies.

23.  Explain, using a diagram, that demand-pull inflation is caused by changes in the determinants of AD, resulting in an increase in AD.

24.  Explain, using a diagram, that cost-push inflation is caused by an increase in the costs of factors of production, resulting in a decrease in SRAS.

25.  Evaluate government policies to deal with the different types of inflation.

2.3 Macroeconomic objectives: Equity in the distribution of income

26.  Explain the difference between equity in the distribution of income and equality in the distribution of income.

27.  Explain that due to unequal ownership of factors of production, the market system may not result in an equitable distribution of income.

28.  Analyze data on relative income shares of given percentages of the population, including deciles and quintiles.

29.  Draw a Lorenz curve and explain its significance.

30.  Explain how the Gini coefficient is derived and interpreted.

31.  Distinguish between absolute poverty and relative poverty.

32.  Explain possible causes of poverty, including low incomes, unemployment and lack of human capital.

33.  Explain possible consequences of poverty, including low living standards, and lack of access to health care and education.

2.3 Macroeconomic objectives: The Role of Taxation in Promoting Equity

34.  Distinguish between direct and indirect taxes, providing examples of each, and explain that direct axes may be used as a mechanism to redistribute income.

35.  Distinguish between progressive, regressive and proportional taxation, providing examples of each.

36.  Calculate the marginal rate of tax and the average rate of tax from a set of data.

37.  Explain that governments undertake expenditures to provide directly, or to subsidize, a variety of socially desirable goods and services (including health care services, education, and infrastructure that includes sanitation and clean water supplies), thereby making them available to those on low incomes.

38.  Explain the term transfer payments, and provide examples, including old age pensions, unemployment benefits and child allowances.

39.  Evaluate government policies to promote equity (taxation, government expenditure and transfer payments) in terms of their potential positive or negative effects on efficiency in the allocation of resources.

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2.2 Aggregate Demand and Aggregate Supply & 2.3 Macroeconomic Objectives

Read Chapter 12 Person Textbook & pages 318-327, 331-343

Section 2.2 & 2.3 Vocabulary

2.2 Aggregate Demand and Aggregate Supply & 2.3 Macroeconomic Objectives

Essential Question(s):

1. Distinguish between the microeconomics concept of demand for a product and the macroeconomic concept of aggregate demand.
2. Construct an aggregate demand curve.
3. Explain why the AD curve has a negative slope.
4. Describe consumption, investment, government spending and net exports as the components of aggregate demand.
5. Explain how the AD curve can be shifted by changes in consumption due to factors including changes in consumer confidence, interest rates, wealth, personal income taxes (and hence disposable income) and level of household indebtedness.
6. Explain how the AD curve can be shifted by changes in investment due to factors including interest rates, business confidence, technology, business taxes and the level of corporate indebtedness.
7. Explain how the AD curve can be shifted by changes in government spending due to factors including political and economic priorities.
8. Explain how the AD curve can be shifted by changes in net exports due to factors including the income of trading partners, exchange rates and changes in the level of protectionism.
9. Define the term aggregate supply.
10. Explain, using a diagram, why the short-run aggregate supply curves (SRAS Curve) is upward sloping.
11. Explain, using a diagram, how the AS curve in the short run (SRAS) can shift due  to factors including changes in resource prices, changes in business taxes and subsidies and supply shocks.
12. Explain, using a diagram, that the monetarist/new classical model of the long-run aggregate supply curve (LRAS) is vertical at the level of potential output (full employment output) because aggregate supply in the long run is independent of the price level.
13. Explain, using a diagram, that the Keynesian model of the aggregate supply curve has three sections because of “wage/price” downward inflexibility and different levels of spare capacity in the economy.
14. Compare and contrast, using the two models above, the way that factors leading to changes in the quantity and/or quality of factors of production (including improvements in efficiency, new technology, reductions in unemployment, and institutional changes) can shift the aggregate supply curve over the long term.
15. Explain, using a diagram, the determination of short-run equilibrium, using the SRAS curve.
16. Examine, using diagrams, the impacts of changes in short-run equilibrium.
17. Explain, using a diagram, the determination of long-run equilibrium, indicating that long-run equilibrium occurs at the full employment level of output.
18. Examine why, in the monetarist/new classical approach, while there may be short-term fluctuations in output, the economy will always return to the full employment level of output in the long run.
19. Examine, using diagrams, the impacts of changes in the long-run equilibrium.
20. Explain, using the Keynesian AD/AS diagram, that the economy may be in equilibrium at any level of real output where AD intersects AS.
21. Explain, using a diagram, that if the economy is in equilibrium at a level of real output below the full employment level of output, then there is a deflationary (recessionary) gap.
22. Discuss why, in contrast to the monetarist/new classical model, the economy can remain stuck in a deflationary (recessionary) gap in the Keynesian model.
23. Explain, using a diagram, that if AD increases in the vertical section of the AS curve, then there is an inflationary gap.
24. Discuss why, in contrast to the monetarist/new classical model, increases in aggregate demand in the Keynesian AD/AS model need not be inflationary, unless the economy is operating close to, or at, the level of full employment.
25. Explain, with reference to the concepts of leakages (withdrawals) and injections, the nature and importance of the Keynesian multiplier.
26. Calculate the multiplier using either of the following formulae. 1 /(1-MPC)    or

                                          i.    1 /(MPS + MPT + MPM)

27. Use the multiplier to calculate the effect on GDP of a change in an injection in investment, government spending or exports.
28. Draw a Keynesian AD/AS diagram to show the impact of the multiplier. 

2.3 Macroeconomic objectives: Phillips curve diagram

        29.  Discuss, using a short-run Phillips curve diagram, the view that there is a possible trade-off between         the unemployment rate and the inflation rate in the short run.

        30.  Explain, using a diagram, that the short-run Phillips curve may shift outwards, resulting in stagflation         (caused by a decrease in SRAS due to factors including supply shocks).

        31.  Discuss, using a diagram, the view that there is a long-run Phillips curve that is vertical at the natural         rate of unemployment and therefore there is no trade-off between the unemployment rate and the         inflation rate in the long run.

2.3 Macroeconomic objectives: Economic Growth

        32.  Explain, using an LRAS diagram, economic growth as an increase in potential output caused by     factors including increases in the quantity and quality of resources, leading to a rightward shift of the     LRAS curve.

        33.  Evaluate the view that increased investment is essential to achieve economic growth,

        34.  Evaluate the view that improved productivity is essential to achieve economic growth.

        35.Discuss the possible consequences of economic growth, including the possible impacts on living     standards, unemployment, inflation, the distribution of income, the current account of the balance of     payments, and sustainability.

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2.1 The Level of Overall Economic Activity & 2.3 Macroeconomic Objectives

Read Chapter 11 & 15 in the Pearson Textbook

Section 2.1 & 2.3 Vocabulary

Essential Question(s):

2.1 The Level of Overall Economic Activity

1.    Explain, using a diagram, the circular flow of income between households and firms in a closed economy with no government.

2.    Identify the four factors of production and their respective payments (rent, wages, interest and profit) and explain that these constitute the income flow in the model.

3.    Outline that the income flow is numerically equivalent to the expenditure flow and the value of output flow.

4.    Explain, using a diagram, the circular flow of income in an open economy with government and financial markets, referring to leakages/ withdrawals (savings, taxes and import expenditure) and injections (investment, government expenditure and export revenue).

5.     Explain how the size of the circular flow will change depending on the relative size of injections and leakages.

6.    Distinguish between GDP and GNP/GNI as measures of economic activity.

7.    Distinguish between the nominal value of GDP and GNP/GNI and the real value of GDP and GNP/GNI.

8.    Distinguish between total GDP and GNP/GNI and per capita GDP and GNP/GNI.

9.    Examine the output approach, the income approach and the expenditure approach when measuring national income.

10.  Calculate nominal GDP from sets of national income data, using the expenditure approach.

11.  Calculate GNP/GNI from data

12.  Calculate real GDP, using a price deflator.

13.  Evaluate the use of national income statistics, including their use for making comparisons over time, their use for making comparisons between countries and their use for making conclusions about standards of living.

14.  Explain the meaning and significance of “green GDP”, a measure of GDP that accounts for environmental destruction.

15.  Explain, using a business cycle diagram, that economies typically tend to go through a cyclical pattern characterized by the phases of the business cycle.

16.  Explain the long-term growth trend in the business cycle diagram as the potential output of the   economy.

17.  Distinguish between a decrease in GDP and a decrease in GDP growth.

2.3   Macroeconomic objectives: Economic Growth

18.  Define economic growth as an increase in real GDP.

19.  Calculate the rate of economic growth from a set of data.

20.  Explain, using a production possibilities curve (PPC) diagram, economic growth as an increase in actual output resulting from factors such as the utilization of unemployed resources and increases in productive efficiency leading to a movement of a point inside the PPC to a point closer to the PPC.

21.  Explain, using a PPC diagram, economic growth as an increase in production possibilities caused by factors including increases in the quantity and quality of resources, leading to outward PPC shifts.

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Development Economics

Section 4.3, 4.4, 4.5, 4.6, 4.7, & 4.8 Developmental Economics 

Section 4.3, 4.4, 4.5 4.6 4.7 & 4.8 Vocabulary

Read Chapter 27, 28, & 29 in the Pearson Textbook

Section 4.3 The role of domestic factors

Domestic factors and economic development

1. With reference to a specific developing economy, and using appropriate diagrams where relevant, examines how the following factors contribute to economic development.
2. Education and health
3. The use of appropriate technology
4. Access to credit and micro-credit
5. The empowerment of women
6. Income distribution

Section 4.4 The role of international trade

International trade and economic development

1. With reference to specific examples, explain how the following factors are barriers to development for economically less developed countries.
1. Over-specialization on a narrow range of products
2. Price volatility of primary products
3. Inability to access international markets
4. With reference to specific examples, evaluate the following factor as a barrier to development for economically less developed countries.
5. Long-term changes in the terms of trade
6. With reference to specific examples, evaluate each of the following as a means of achieving economic growth and economic development.
7. Import substitution
8. Export promotion
9. Trade liberalization
10. The role of the WTO
11. Bilateral and regional preferential trade agreements
12. Diversification

Section 4.5 The role of foreign direct investment (FDI)

Foreign direct investment and multinational corporations (MNCs)

The meaning of FDI and MNCs

1.  Describe the nature of foreign direct investment (FDI) and multinational corporations (MNCs).
2. Explain the reasons why MNCs expand into economically less developed countries.
3. Explain the characteristics of economically less developed countries that attract FDI, including low cost factor inputs, a regulatory framework that favors profit repatriation and favorable tax rules.

 Advantages and disadvantages of FDI for economically less developed countries

1. Evaluate the impact of foreign direct investment (FDI) for economically less developed countries.

Section 4.6 The roles of foreign aid and multilateral development assistance

Foreign aid

Classifications and types of aid

1. Explain that aid is extended to economically less developed countries either by governments of donor countries, in which case it is called official development assistance (ODA), or by nongovernmental organizations (NGOs).
2. Explain that humanitarian aid consists of food aid, medical aid and emergency relief aid.
3. Explain that development aid consists of grants, concessional long-term loans, project aid that includes support for schools and hospitals, and programed aid that includes support for sectors such as the education sector and the financial sector.
4. Explain that, for the most part, the priority of NGOs is to provide aid on a small scale to achieve development objectives.
5. Explain that aid might also come in the form of tied aid.
6. Examine the motivations of economically more developed countries giving aid.
7. Compare and contrast the extent, nature and sources of ODA to two economically less developed countries.

 Evaluation of foreign aid

1. Evaluate the effectiveness of foreign aid in contributing to economic development.
2. Compare and contrast the roles of aid and trade in economic development.

Multilateral development assistance

The roles of the International Monetary Fund (IMF) and the World Bank

1. Examine the current roles of the IMF and the World Bank in promoting economic development.

Section 4.7 The role of international debt

Foreign debt

Foreign debt and its consequences

1. Outline the meaning of foreign debt and explain why countries borrow from foreign creditors.
2. Explain that in some cases countries have become heavily indebted, requiring rescheduling of the debt payments and/or conditional assistance from international organizations, including the IMF and the World Bank.
3. Explain why the servicing of international debt causes balance of payments problems and has an opportunity cost in terms of foregone spending on development objectives.
4. Explain that the burden of debt has led to pressure to cancel the debt of heavily indebted countries.

Section 4.8 The balance between markets and intervention

Strengths and weaknesses of market-oriented policies

1. Discuss the positive outcomes of market-oriented policies (such as liberalized trade and capital flows, privatization and deregulation), including a more efficient allocation of resources and economic growth.
2. Discuss the negative outcomes of market-oriented strategies, including market failure, the development of a dual economy and income inequalities.

Strengths and weaknesses of interventionist policies

1. Discuss the strengths of interventionist policies, including the provision of infrastructure, investment in human capital, the provision of a stable macroeconomic economy and the provision of a social safety net.
2. Discuss the limitations of interventionist policies, including excessive bureaucracy, poor planning and corruption.
3. Explain the importance of good governance in the development process.
4. Discuss the view that economic development may best be achieved through a complementary approach, involving a balance of market oriented policies and government intervention.

                                                                                                             

                                                           

                                                                                          

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IB Economics Syllabus Outline Review 

Essential Question(s):

Section 1: Microeconomics

1.0 Foundation of economics

1.1 Competitive markets: demand and supply (some topics HL only)

1.2 Elasticity

1.3 Government intervention (some topics HL extension, plus one topic HL only)

1.4 Market failure (some topics HL only)

1.5 Theory of the firm and market structures (HL only)

1.6 Factor market (AP only)

Section 2: Macroeconomics

2.1 The level of overall economic activity (one topic HL extension)

2.2 Aggregate demand and aggregate supply (one topic HL only)

2.3 Macroeconomic objectives (some topics HL extension, plus one topic HL only)

2.4 Fiscal policy

2.5 Monetary policy

2.6 Supply-side policies

Section 3: International economics

3.1 International trade (one topic HL extension, plus one topic HL only)

3.2 Exchange rates (some topics HL extension)

3.3 The balance of payments (one topic HL extension, plus some topics HL only)

3.4 Economic integration (one topic HL extension)

3.5 Terms of trade (HL only)

Section 4: Development economics

4.1 Economic development

4.2 Measuring development

4.3 The role of domestic factors

4.4 The role of international trade (one topic HL extension)

4.5 The role of foreign direct investment (FDI)

4.6 The roles of foreign aid and multilateral development assistance

4.7 The role of international debt

4.8 The balance between markets and intervention