Current Events:
Financial Crisis
The Chapter 21 Multiple Choice MAKE-UP Test, composed of 50 questions, is tomorrow.
The Chapter 22 Multiple Choice Test, composed of 50 questions, is on Friday: per the 4th Quarter procedure, there are no Test Prep pages.
After these Tests, however, more Test sample questions, will be posted.
In the meantime, re-arrange yourselves into your three small groups and you can review sample Chapter multiple choice questions to answer. Decide within the groups how you want to sub-divide the questions and we can then review the suggested answers.
As we have time we can attempt diagnostic, full-length tests, and detailed answer explanations as well.
Review of Chs. 15 - 20 Multiple Choice Sample Questions
Ch. 26
Ideas for Capturing Your Classroom Audience
PPP and the Big Mac
As described in the text, the Big Mac Index published by The Economist has always
been meant to be a humorous and intuitive way to explain purchasing power parity.
However, as simple as it is, the Big Mac Index has been pretty good at predicting the future course of some currencies. Visit the Web site for the Big Mac Index at
http://www.economist.com/markets/Bigmac/Index.cfm and answer the following:
Collect data to answer the following:
1) Pick three currencies that were listed as overvalued at the time and three
that were listed as undervalued. Have those currencies subsequently moved
in the indicated directions?
2) Describe the limitations of the Big Mac Index.
Tips from a Colleague
The most challenging part of this chapter is the material on the current and capital accounts. Students are likely to understand that if we import more than we export we have a trade deficit, but the logic of why this results in a capital account surplus is likely to elude them. You might consider a simple intuitive illustration of swapping goods. Offer to trade an inexpensive stick pen for a student’s hat or other item which has an obviously higher value. Explain that such a direct swap of goods would be similar to imports and exports. When the student suggests that the goods being traded are not equal in value, offer different amounts of money (hypothetically) to make up the difference. Explain that the willingness of someone to take U.S. money to make up the difference is analogous to the increased holdings of U.S. assets by foreigners that make up the capital account.
Email HW to gmsmith@shanahan.org
2. As described in the text, the Big Mac Index published by The Economist has always
been meant to be a humorous and intuitive way to explain purchasing power parity.
However, as simple as it is, the Big Mac Index has been pretty good at predicting the future course of some currencies. Visit the Web site for the Big Mac Index at
http://www.economist.com/markets/Bigmac/Index.cfm and answer the following:
Collect data to answer the following:
1) Pick three currencies that were listed as overvalued at the time and three
that were listed as undervalued. Have those currencies subsequently moved
in the indicated directions?
2) Describe the limitations of the Big Mac Index.
3. As review for HW, typical questions that you may encounter on the actual AP Economics Macro Test are included daily:
Review Questions (Princeton):
a) A decrease in the required reserve ratio
b) An increase in the discount rate
c) The selling of bonds by the Federal Reserve
d) An increase in the fraction of deposits that must be held by banks
e) Open market operations involving the sale of government securities
43. Marginal propensity to consume is
a) the change in consumption divided by the change in prices
b) the cost of consuming one more item
c) the change in consumption divided by the change in income
d) the percentage change in consumption divided by the percentage change in prices
e) the concept that it is more satisfying to consume than save
44. A professional singer who loses his voice may have a hard time finding employment because he or she has no marketable skills. This is an example of which of the following?
a) Frictional unemployment
b) Structural unemployment
c) Cyclical unemployment
d) Seasonal unemployment
e) discouraged workers
