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I. Fundamental Economic Concepts* 15% A. Productive resources are limited. Therefore, people cannot have all of the goods and services they want; as a result, they must choose some things and give up others.*
1. The basic economic problem: unlimited wants and limited resources* a) Scarcity and choice* b) Opportunity costs and trade-offs*
2. Productive resources (factors of production), definitions, and examples* a) Natural resources* b) Human resources* c) Capital resources* d) Entrepreneurial resources*
3. Production of goods and services* a) Goods and services are used to satisfy wants.* b) Demand for resources, derived demand* c) Production costs—fixed, variable, marginal, total* d) Production possibilities*
4. Present, future, intended, and unintended consequences of choices* B. Effective decision-making requires a comparison of the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions.*
1. Benefit–cost analysis*
2. Marginal benefits and marginal costs*
3. Individual and social goals* a) Positive and normative economics* b) Optimization*
C. Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.*
1. The basic economic questions* a) What to produce?* b) How to produce?* c) Who receives the benefits of production?*
2. Economic systems and their characteristics* a) Market* b) Planned/command* c) Mixed market*
3. Central planning versus market mechanisms; historical and current examples*
4. Competition in a market economy*
D. People respond predictably to positive and negative incentives.*
1. Incentives, rewards/benefits, penalties/costs*
2. Values and self-interest influence choices.*
3. Monetary and non-monetary incentives* E. Voluntary exchange occurs only when all participating parties expect to gain. This is true of trade among individuals or organizations within a nation and among individuals and organizations in different nations.*
1. Markets* a) Types* b) Dynamics* c) Interdependence*
2. Trade and exchange (domestic and foreign)*
3. Barter and money*
F. When individuals, regions, and nations specialize in what they can produce at the lowest opportunity cost and then trade with others, both production and consumption increase.*
1. Specialization and division of labor*
2. Resource distribution and interdependence*
3. Absolute and comparative advantages* a) Definitions* b) Examples*
4. Free trade and trade barriers* a) Quotas and tariffs* b) Other forms of protectionism*
5. Imports and exports* a) Trade deficit* b) Balance of trade* II. Microeconomics* 30% A. Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services.*
1. Prices, market prices, and relative prices*
2. Market clearing/equilibrium price*
3. Supply and quantity supplied*
4. Demand and quantity demanded*
B. Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives.*
1. Laws of supply and demand*
2. Graphing supply and demand* a) Supply schedule and supply curve* b) Demand schedule and demand curve*
3. Shifts in supply and demand*
4. Factors influencing supply* a) Number of producers* b) Costs of production* c) Opportunity costs*
5. Factors influencing demand* a) Utility* b) Income* c) Price elasticity of demand* d) Substitutes* e) Complementary goods* C. Competition among sellers lowers costs and prices and encourages producers to produce more of what consumers are willing and able to buy. Competition among buyers increases prices and allocates goods and services to those people who are willing and able to pay the most for them.*
1. Competition and competitive markets; incentives*
2. Price and non-price competition*
3. Market structures (basic types and examples)* a) Monopoly* b) Monopolistic competition* c) Oligopoly* d) Pure competition*
4. Investment decisions* a) Innovation* b) Technology* D. Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution—clearly defined and well-enforced property rights—is essential to a market economy.*
1. Financial intermediaries* a) Roles* b) Savings* c) Interest*
2. Labor unions* a) Basic functions* b) Market power and strikes*
3. Property rights* a) Importance to market decision-making* b) "Tragedy of the Commons"* c) Constitutional protections in the United States* i) Due process* ii) Patents and copyrights*
E. Money makes it easier to trade, borrow, save, invest, and compare the values of goods and services.*
1. Money and currencies*
2. Functions of money* a) Medium of exchange* b) Store of value* c) Standard of value*
3. Money supply and changes in the supply of money* a) Types of money—currency, demand deposits, savings accounts, money market* b) Definitions of money supply*
4. Interest rates: borrowing, saving, and investment spending* F. Income for most people is determined by the market value of the productive resources they sell. What workers earn depends primarily on the market value of what they produce and how productive they are.*
1. Income, wages, and salaries* a) Rent* b) Wages* c) Interest* d) Profit*
2. Derived demand and labor markets* a) Demand for labor* b) Wage rates* G. Human Capital Development and Labor Productivity*
1. Factors influencing incomes*
2. Returns on investment in education*
3. Labor productivity*
4. Technology and productivity* H. Investments in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living.*
1. Human and physical capital*
2. Standard of living* a) Definition* b) Real growth* c) Global income distribution—examples* I. Entrepreneurs are people who take the risks of organizing productive resources to make goods and services. Profit is an important incentive that leads entrepreneurs to accept the risks of business failure.*
1. Entrepreneurial risk and reward*
2. Profit and incentives*
3. Property rights* III. Macroeconomics* 30% A. A nation's overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by households, firms, government agencies, and others in the economy.*
1. Aggregate demand* a) Measurement* b) Graphing*
2. Aggregate supply* a) Measurement* b) Graphing*
3. Gross domestic product and national income* a) Nominal GDP* b) Real GDP* c) Per capita GDP*
4. The circular flow of the economy*
5. Economic growth* a) Definitions: growth, recession, depression* b) Measurements—nominal and real, GDP deflator* B. Unemployment imposes costs on individuals and nations. Unexpected inflation imposes costs on many people and benefits others because it arbitrarily redistributes purchasing power. Inflation can reduce the rate of growth of national living standards because individuals and organizations use resources to protect themselves against the uncertainty of future prices.*
1. Labor force* a) Definitions* b) Measurements*
2. Employment and unemployment* a) Employment rate* b) Unemployment rate*
3. Unemployment—causes and types* a) Structural unemployment* b) Cyclical unemployment* c) Frictional unemployment*
4. Unions and market power* C. Money and the Money Supply*
1. Money supply—components and measures* a) M1* b) M2 and other measures*
2. Consumer price index*
3. Inflation*
4. Interest rates, adjusted for inflation, rise and fall to balance the amount saved with the amount borrowed and thus affect the allocation of scarce resources between present and future uses.* a) Nominal interest rates* b) Types of interest rates; the "prime rate"* c) Real/adjusted* D. There is an economic role for government to play in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Government policies also redistribute income.*
1. Public goods and services*
2. Basic taxes—federal and state* a) Personal income* b) Corporate income* c) Sales* d) Property* e) Excise* f) Capital gains*
3. Promoting competition* a) U.S. Constitution commerce clause* b) Antitrust laws*
4. Positive and negative externalities of public policy*
5. Income security and redistribution* a) Social Security* b) Welfare/Aid to Families with Dependent Children* c) Unemployment compensation* E. The costs of government policies sometimes exceed the benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.*
1. Public policy goals* a) Special interest groups* b) Trade-offs* c) Equity vs. efficiency*
2. Policy debates* a) Immigration* b) Environmental protection*
3. Price and wage controls* a) Options and rationales* b) Historical examples*
F. The federal government's budgetary policy and the Federal Reserve System's monetary policy influence the overall levels of employment, output, and prices.*
1. Fiscal policy goals and fiscal policy tools* a) Federal taxes—major types* b) Federal spending* c) Fiscal policy options, spending, and tax policy* d) Keynesian economics*
2. National debt* a) Size and composition* b) Debt vs. deficit*
3. Federal Reserve System* a) Structure* b) Basic functions* c) Operations*
4. Monetary policy goals* a) Price stability* b) Full employment* c) Economic growth*
5. Monetary policy tools* a) Open-market operations* b) Discount rate* c) Reserve requirements*
6. Supply-side policies* IV. International Trade and Global Economic Development* 10%
A. Economic Growth and Development—Basic Concepts*
1. Global development patterns*
2. Problems of less-developed countries*
3. Economic development organizations* a) World Bank* b) International Monetary Fund* c) Other organizations*
B. Foreign Trade and Exchange*
1. Absolute and comparative advantage*
2. Exchange rates, U.S. dollar, Japanese yen, and European Union euro*
C. United States' Trade*
1. Exports, imports*
2. Trade balance and deficits*
D. International Organizations and Trade Agreements*
1. Tariffs and other trade barriers* a) NAFTA, European Union, GATT* b) Tariffs, quotas, protectionism* c) Free trade debate*
2. Conflict resolution; recent uses of trade sanctions* V. The Economy of Mexico 15%
A. Mexican Economic History 1. Pre-Cortez indigenous economic organization
2. The colonial period
3. Post-independence a) Independence declared in 1810; recognized by Spain in 1821 b) Mexican-American War
4. The Porfiriato
5. The Mexican Revolution and its aftermath
6. The Great Depression (early 1930s)
7. Oil nationalization (1938)
8. Post-World War II growth—the ISI (import substituting industrialization) period and
9. 1982 crisis and subsequent market policies
10. 1994 NAFTA enactment, Zapatistas
11. 1994–5 peso crisis B. The Mexican Economy Today
1. Economic indicators a) Macro b) Welfare c) Financial d) Analysis—what challenges does Mexico face today? 2. How the economy is organized and government policy a) Components of the economy b) Financial organization and monetary/foreign exchange policy i) Role of central bank ii) Banks, the Bolsa, and foreign financing (foreign direct investment, c) Trading partners and trade policy i) NAFTA and dependence on the U.S. ii) Other negotiations and agreements d) Fiscal policy i) Revenues (a) Weakness of tax system (b) Dependence on Pemex (c) Attempted reforms ii) Expenditures (a) Government spending (b) Transfer payments iii) Government debt
3. Ongoing challenges and the prickly relationship with the U.S. a) Trade b) Investment c) Migration—remittances d) Border infrastructure and shared water resources | |||
