Economics Syllabus

CARIBBEAN EXAMINATIONS COUNCIL Caribbean Advanced Proficiency Examinations Correspondence gratifyd to to the syllabus should be addressed to The Pro-Registrar Caribbean Examinations Council Caenwood Centre 37 Arnold Road, Kingston 5, Jamaica, W. I. send for Number (876) 920-6714 Facsimile Number (876) 967-4972 E-mail address emailprotected org Website www. cxc. org Copyright 2008, by Caribbean Examinations Council The Garrison, St. Michael BB 11158, Barbados This document CXC A20/U2/08 replaces CXC A20/U2/03 issued in 2003. Please none that the syllabus was revised and amendments atomic number 18 forecastd by italics and plumb lines.First Issued 2003 Revised 2008 Please check the website www. cxc. org for updates on CXCs syllab works. RATIONALE1 AIMS 2 SKILLS AND ABILITIES TO BE ASSESSED2 PRE-REQUISITES OF THE SYLLABUS3 STRUCTURE OF THE SYLLABUS3 whole 1 MICROECONOMICS module 1 METHODOLOGY necessity AND yield 4 mental faculty 2 commercialise STRUCTURE, consider FAILUR E AND treatment 12 module 3 dispersal possibility 17 brotherly unit 2 MACROECONOMICS staff 1 MODELS OF THE MACROECONOMY27 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES28 MODULE 3 GROWTH, sustain adapted ripening AND orbicular RELATIONS36 OUTLINE OF ASSESSMENT44REGULATIONS FOR PRIVATE CANDIDATES 55 REGULATIONS FOR RESIT CANDIDATES56 ASSESSMENT GRID57 RESOURCES58 GLOSSARY59 T T he Caribbean Advanced Proficiency Examinations ( drapery) ar designed to provide certification of the donnish, vocational and technical achievement of students in the Caribbean who, having comp permited a minimum of phoebe bird years of secondary education, wish to further their studies. The examinations address the skills and knowledge acquired by students under a flexible and articulated system where overmasters ar confederationised in 1-Unit or 2-Unit line of merc occurises with each Unit containing ternion staffs.Subjects examined under drapery whitethorn be studied con surely or singly, or may be combined with vanquishs examined by other examination boards or institutions. The Caribbean Examinations Council offers three types of certification. The first is the award of a certificate stageing each cape Unit completed. The second is the CAPE diploma, awarded to vistas who pass water satisfactorily completed at least six Units, including Caribbean Studies. The third is the CAPE Associate Degree, awarded for the satisfactory consequence of a prescribed cluster of seven CAPE Units including Caribbean Studies and Communication Studies.For the CAPE diploma and the CAPE Associate Degree, candidates must complete the cluster of essential Units within a ut or so period of five years. Recognized educational institutions bring ining candidates for CAPE towards the award of the Councils Associate Degree in lodge categories must, on registering these candidates at the start of the qualifying year, have them confirm in the required form, the Associate Degree they wish to be awarded. Candidates allow for non be awarded any possible advantage(a)s for which they did not cave in. T ? RATIONALE scotchal science is the regard of how golf-club provides for itself by making the most sparingal physical exertion of meagre resources so that both one-on-one and kind welfare may be improved. The subject, in that locationfore, covers the study of individuals, ho wontholds, firms, government activity and inter subject frugal institutions as they attempt to make correct use of scarce resources. The study of Economics encap ables individuals to collapse a melio esteem come acrossing of the frugal issues which assume them and the world in which they live. It go out in like manner enable students to offer informed comments on sparing matters.The knowledge gained from this course in Economics pull up stakes be of lifelong honour to the student. The act of the subject on all areas of activity should stimulate the individual to pass o ver reading and behaviouring research in Economics. It is recognised that persons doing this course may be drawn from unalike backgrounds and may possess dissimilar amours. Some may wish to study Economics as preparation for further metier in the subject. Others may study the subject to complement other subject disciplines, such(prenominal) as, bursterers in finance, explanation or law.Some students may see the subject as one worthy of study in its own right. Students of Economics will be able to house, significantly, to economic and favorable break inment in the Caribbean and the wider world by acting as catalysts for wider knowingness of social and economic issues. A study of Economics at the CAPE direct will be of benefit to all students by introducing them to the philosophy which underlies everyday economic interactions. The study will also train the student to think logically, particularly and impartially on a shape of contentious issues. AIMS The syllabus aims to 1. hike up meeting of the rudimentary principles and inventions of economics which are accepted in queen-sized measure by economists while recognising that the field is changing continuously 2. educate an appreciation of the various methods employ by economists in analysing economic problems 3. develop an find outing of the global frugality and of the intercourseships betwixt rich and poor nations with applaud to inter field of study trade and finance and the most important inter field of study financial institutions 4. ncourage students to consent economic principles, theories and tools to everyday economic problems, for use, pompousness, un practice, surroundal degradation, sustainable evolution and re-sentencing range instability and to contribute meaning goody to any conference on these issues 5. encourage students to apply economic possibleness to the critical issues which affect the pocket-sizeer open Caribbean-type thriftiness 6. encourage students to judge contentious economic issues so that decision-making may be informed by logical and critical thinking 7. sensitize students to the need for ethical behaviour in the act up of economic transactions. SKILLS AND ABILITIES TO BE ASSESSED The assessment will test candidates skills and abilities to 1. range and exempt economic theories, principles, plans and methods 2. interpret, analyse and solve economic problems utilize economic models and ideas 3. develop structural and reasoned expositions and treasure economic theories and policies. PRE-REQUISITES OF THE SYLLABUS Successful community in this course of study will be enhanced by the possession of right(a) verbal and written communications skills. A good foundation in Mathematics would be an asset to students doing this course.STRUCTURE OF THE SYLLABUS The program is arranged into deuce Units. Each Unit consists of three Modules, each Module requiring 50 contact hours. unit 1 MICROECONOMICS Module 1-Methodology Demand and write out Module 2-Market Structure, Market Failure and Intervention Module 3-Distribution possible action building block 2 MACROECONOMICS Module 1-Models of the Macroeconomy Module 2-Macroeconomic puzzles and Policies Module 3-Growth, Sustainable ontogeny and transnational traffic Lists of resources are provided in the syllabus. The lists provide information that may be helpful for the study of each Module.It is advised that the topics listed in the variances do not necessarily follow sequentially. Teachers may thus introduce certain concepts originally others. It is recognised that Economics may be taught victimisation a rigorously qualitative onward motion or a strictly quantitative approach. However, a proper mix of the two approaches is critical to the understanding of the subject at this direct. Teachers are advised, therefore, that proper delivery of the subject would involve the integration of the two approaches. ? unit of measurement 1 MICROECONOMICS MODU LE 1 METHODOLOGY rent AND SUPPLYGENERAL OBJECTIVES On climax of this Module, students should 1. assess the master(prenominal) problem of economics namely, the allocation of scarce resources and the inevitability of choice 2. understand the laws, principles and theories governing call for and sum up 3. understand the basic tools of economic analysis. specialized OBJECTIVES subject area 1 transform Problem of Economics Students should be able to 1. pardon the concept of scarcity 2. apply the concept of probability make up in a variety of real-life situations 3. pardon the concept of payoff possibilities confines (PPF) . use the employment possibilities frontier to indicate constant returns, decrease returns and increasing returns 5. account for shifts in the production possibilities frontier (PPF) 6. divergentiate betwixt positive and normative economics 7. lineation the advantages and disadvantages of the alternative mechanisms by which resources are allocated. co re 1. The meaning of scarcity, free goods and economic goods. 2. (a)Definition of opportunity mo take inary value. b) Choice what, how and for whom to produce. unit 1 MODULE 1 METHODOLOGY take up AND SUPPLY (contd) ) The concept of opportunity cost employ to economic agents (individuals, households, firms and governments). 3. (a)Assumptions maximum return attainable, prone full employment and constant state of technology. (b)Regions attainable, unattainable, efficient and inefficient take aims of production. 4. wareion possibilities frontier slopes and shapes. 5. subprogram of production possibilities frontier to show growth and technological change. 6. Examples of positive and normative statements. 7. Different types of economic systems traditional, trade, plan and mixed. specific OBJECTIVES root 2 surmise of Consumer Demand Students should be able to 1. rationalise the concept of globe return 2. exempt the law of diminish borderline utility and the limitation of marginal utility guess 3. excuse the meaning of tranquillity make outs and face lines 4. exempt pine awayr relaxation wheel using the marginal utility approach 5. beg off consumer residual using the indifference curve approach 6. specify the income and substitution acts of a cost change 7. beg off powerful implore 8. reach the demand curve using both the marginal utility and indifference curve approaches 9. ifferentiate among normal, inferior and Giffen goods 10. distinguish amidst shifts of the demand curve and movements along the curve social unit 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) 11. pick up the factors that affect demand 12. let off the meaning of consumer senseless 13. formulate charge childs play, income elasticity and cross elasticity of demand 14. address numerical values of elasticity 15. interpret numerical values of elasticity 16. assess the implications of set elasticity of demand for tag on spending and revenue 17. state t he factors that read the price elasticity of demand. nitty-gritty 1. emolument summarise, marginal, cardinal (marginalist approach), ordinal (indifference curve approach). 2. (a) definition of diminishing marginal utility. (b)The main assumptions and limitations of borderline Utility Theory. 3. Indifference curves and the budget constraint (budget lines). 4. The law of equi-marginal returns. 5. The point of contact of the budget line to the indifference curve. 6. Income and substitution payoffs of a price change. 7. Effective demand. 8. Deriving the demand curve using the marginal utility as well as the indifference curve approach. . Normal, inferior and Giffen goods using the indifference curve approach. 10. Shift versus movements along demand curves. 11. mo webary value and the conditions of demand. 12. Consumer pointless including lifelike representations. UNIT 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) 13. Price, income, and cross elasticities. 14. Calculation of va lues of elasticity. 15. Classification and interpretations (sign and size) including the lotterys and interpretations of graphs. 16. The implications of price elasticity of demand for tot up spending and revenue. 17.Factors that determine the price elasticity of demand. proper(postnominal) OBJECTIVES take 3 Theory of Supply Students should be able to 1. identify the factors of production 2. explain the term production function 3. differentiate between the short(p)ly devolve and long run 4. explain the law of diminishing returns 5. regard fare, just and marginal physical product 6. explain the kinships among gibe, number and marginal physical product 7. identify the stages of production as they relate to total, average and marginal product 8. calculate total, average, marginal and other be 9. xplain the relationship among total, average and marginal cost 10. explain wherefore fork out curves are usually positively sloped 11. explain the concept of maker unneeded 12. explain the shape of the short run and long run supply curves UNIT 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) 13. explain returns to scale and the concepts of economies and diseconomies of scale 14. distinguish between a movement along the supply curve and a shift in the supply curve 15. explain the concept of elasticity of supply 16. calculate elasticity of supply 17. interpret elasticity of supply. sate . Factors of production land, jade, groovy and entrepreneurship. 2. kindred between make and input. 3. Fixed and variable factors. 4. The law of diminishing returns. 5. Calculation of total average and marginal physical product. (See suggested teaching and study activities). 6. Change in the relationship as input lettuce. 7. Production and its stages, as they relate to the total, average and marginal product including the use of graphs. 8. (a)Fixed cost, variable cost, total cost, marginal cost, average fixed cost, average variable cost, average total cost, sunk cost s. ) The shape of the long run average total cost curve. c) Productive optimum. 9. The relationship between total, average and marginal cost including the use of graphs. 10. Relationship between quantity supplied and price. 11. Producer surplus including in writing(p) representations. UNIT 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) 12. Relationship between marginal cost and the average cost in the short run and long run. Explanation of wherefore the supply curve is the section of the marginal cost curve higher up the average variable cost and average total cost. 13. (a)Long run and economies of scale. ) Factors determining economies of scale. c) Internal and external economies of scale. d) Diseconomies of scale. 14. Price and the conditions of supply. 15. Concept of elasticity of supply. 16. Calculation of elasticity of supply. 17. Classification and interpretation (size of coefficient) including the drawing and interpretation of graphs. particularized OBJECTIVES governme nt issue 4 Market Equilibrium Students should be able to 1. explain the concept of the market 2. explain market offset 3. calculate residue price and quantity 4. sketch factors that cause changes in equilibrium . respect the impact of price mark offs on market equilibrium 6. analyse the effects of taxation and subsidies on market equilibrium. UNIT 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) CONTENT 1. The concept of the market. 2. Equilibrium price, equilibrium quantity. 3. Use of demand and supply data to calculate equilibrium price and quantity. 4. Changes in conditions of supply and demand. 5. The effects of price ceilings and price floors on equilibrium. 6. (a)The effects of taxation and subsidies on market equilibrium. (b)The incidence of an substantiative tax.Suggested teaching method and Learning Activities To drive on students acquirement of the objectives of this Module, teachers are advised to consume students in the teaching and learnedness activities list ed below. 1. For topic 1, deputise Problem of Economics, let students provide examples from personal life, the home, firms and government to demonstrate opportunity cost and the production possibilities frontier (PPF). 2. For topic 2, Theory of Consumer Demand, let students derive their own record and plot the demand curve for commodities which they use in their everyday lives. 3.For utility, use water or any other drink to show the different levels of satisfaction (utility). Use the data to derive total and marginal utility curves. 4. For the concept of elasticity, teachers may use two types of materials, one that could change in varying degrees and the other which remains the same regardless of circumstances. Teachers should then apply this concept to market conditions illustrating the concepts of elasticity and inelasticity. 5. For deadweight loss, teachers may use the graphs for consumer and manufacturing business surplus to show how market interference may lead to loss welf are (deadweight loss). 6.For stages of production, allow students to derive the total average and marginal product curves using simulated data. Use the results of the graphs to point out the different stages of production. An example is given below. UNIT 1 MODULE 1 METHODOLOGY DEMAND AND SUPPLY (contd) GRAPH SHOWING THE STAGES OF PRODUCTION pic (i)Stage 1occurs up to the point where APPL is at its maximum. (ii)Stage 2 occurs from the point where APPL is at a maximum up to the point where MPPL is zero. In this stage new workers add to total physical output. (iii)Stage 3 occurs when MPPL is negative. The producer will operate in stage 2.In stage 1 there is insufficient tire out being used (up to the point where MPPL is at its maximum) and the output per worker is increasing. In stage 3 the producer gets no assenting to total physical output from admittanceal workers. It would be possible to have more total physical product with less jab utilise to a fixed factor (say machinery). UNIT 1 MODULE 2 MARKET STRUCTURE, MARKET FAILURE AND interposition GENERAL OBJECTIVES On completion of this Module, students should 1. appreciate the distinction between the different types of market structures 2. develop awareness of the causes of market failure . appreciate the measures that can be adopted to abase or eliminate market failure 4. appreciate the arguments which suggest that government intervention may not necessarily improve economic performance. SPECIFIC OBJECTIVES TOPIC 1 Market Structure Students should be able to 1. digest the goals of the firm 2. explain how firms measure profits 3. explain the concepts of average, marginal and total revenue 4. explain the concept of market structure 5. portray the characteristics of the different market structures 6. distinguish among the different market structures 7. xplain the factors that beguile the pricing and output decisions of the firm 8. calculate measures of industrial concentration 9. interpret measures of indu strial concentration. UNIT 1 MODULE 2 MARKET STRUCTURE, MARKET FAILURE AND handling (contd) CONTENT 1. Profit maximization, growth, satisficing, sales and revenue maximization, market dominance. 2. Total revenue, total cost, normal and economic (abnormal) profit. 3. Relationship between average, marginal and total revenue. 4. Types of market structures perfect competition, monopoly including price discrimination, monopolistic competition, oligopoly and cartels. . Characteristics of the different market structures. a) barriers to entry b) incorporate over market and price c) nature of the good d) numbers of buyers and sellers e) warring behaviour and performance. 6. Focus on all characteristics of the different markets in addition to profit maximization. a) Examples of close approximations of market structures in the Caribbean. 7. Marginal cost and marginal revenue, total cost and total revenue, marginal cost pricing and average cost pricing. 8. Herfindahl Hirschman Index the per centage of an constancys output produced by its four largest firms (four-firm concentration ratio) pic where si is the market share of firm i in the market, and n is the number of firms. 9. (a)Interpretation related to market structures. b) Limitations of measures of industrial concentration. UNIT 1 MODULE 2 MARKET STRUCTURE, MARKET FAILURE AND INTERVENTION (contd) SPECIFIC OBJECTIVES TOPIC 2 Market Failure Students should be able to 1. explain the concept of economic efficiency 2. distinguish among private goods, public goods and merit goods 3. distinguish between social costs and private costs and social benefits and private benefits 4. explain the concept of market failure 5. explain what is meant by deadweight loss . outline the causes of market failure. CONTENT 1. Inclusion of intelligence of Pareto efficiency. 2. (a)Examples of private goods, public goods and merit goods. (b)Discussion of issues of rivalry and exclusion. 3. Social costs, private costs, social benefits, priva te benefits, external costs, external benefits. Use of graphical representations. 4. Divergence of social costs and social benefits and efficiency. Use of graphical representations. 5. Deadweight loss including verbal and graphical representations. 6. Causes of market failure a) monopoly b) public goods and merit goods c) externalities positive and negativeUNIT 1 MODULE 2 MARKET STRUCTURE, MARKET FAILURE AND INTERVENTION (contd) d) divergence between social and private costs and social and private benefits e) imperfect information f) asymmetric information adverse selection and honorable hazard g) open access to resources h) lack of property rights (squatting, streams, ocean) i) non-existence of markets (for trading). SPECIFIC OBJECTIVES TOPIC 3 Intervention Students should be able to 1. evaluate the measures used by government to correct market failure 2. evaluate the measures used by the private orbit to correct market failure. CONTENT 1.Measures used by government to control ma rket failure a) -regulation anti-trust policy taxation privatisation and deregulation state ownership subsidies legislation market creation (tradable permits) b) pros and cons of government intervention c) -merits and demerits effectiveness of intervention in Caribbean societies (effect of small size in relation to policy making). UNIT 1 MODULE 2 MARKET STRUCTURE, MARKET FAILURE AND INTERVENTION (contd) 2. Private Sector Intervention (a)corporate code of conduct (b)corporate social responsibility (c)voluntary agreements (d)corporate ethics.Suggested Teaching and Learning Activities To facilitate students attainment of the objectives of this Module, teachers are advised to engage students in the teaching and learning activities listed below. 1. For price discrimination, teachers could identify the first, second and third degree price discrimination using different examples from students experiences. Teachers should then illustrate by use of diagrams. 2. For the kinked demand curve model, teachers may use the daily newspaper or mobile phone industry as examples. UNIT 1 MODULE 3 DISTRIBUTION supposition GENERAL OBJECTIVES On completion of this Module, students should . understand what accounts for the returns that accrue to the owners of the factors of production 2. appreciate the issues surrounding pauperism and the measures used to gruntle poverty 3. develop skills in applying microeconomic analysis to critical social issues involving income inequality. SPECIFIC OBJECTIVES TOPIC 1 The Demand for and Supply of Factors Student should be able to 1. explain the rewards of the factors of production 2. explain the concept of derived demand 3. outline the marginal productivity theory 4. apply the marginal productivity theory to the demand for land, great and labour 5. nalyse the factors affecting the supply of land, capital and labour 6. analyse the factors determining rent, interest and final payment 7. distinguish between transfer earnings and economic rent. CONTENT 1. Rent, interest, wages and profits. 2. Derived demand. 3. (a)The assumptions and limitations of Marginal Productivity Theory. (b)Marginal Physical Product, Marginal Revenue Product and their relationship. UNIT 1 MODULE 3 DISTRIBUTION conjecture (contd) 4. The value of the Marginal Product a) land b) labour c) capital using present value (use of graphical representation required). 5.The fixity of land, the supply of loanable funds and the labour supply. 6. The demand for and supply of factors. 7. Numerical, graphical and verbal explanations of transfer earnings and economic rent. SPECIFIC OBJECTIVES TOPIC 2 Wage Differentials Student should be able to 1. explain the concept of wage differentials 2. analyse imperfections in the labour market 3. analyse the effect of labour mobility on wages 4. explain the concept of compensating wage differentials 5. explain the role of authorities, flip Unions and Employers Associations in the pricing of labour. CONTENT 1.Differ ences in wages within industries and among industries. 2. Imperfections on the demand side (for example, differences in marginal productivity) and on the supply side (for example, geographical immobility). 3. The mobility and immobility of labour geographical (migration of workers), occupational. 4. Compensating (equalizing) differentials. UNIT 1 MODULE 3 DISTRIBUTION THEORY (contd) 5. The minimum wage rate monopsonies migration of workers collective bargaining trade union strategies, the role of employers associations efficiency wage. SPECIFIC OBJECTIVES TOPIC 3 Income inequality, pauperisation and Poverty AlleviationStudents should be able to 1. differentiate between size and functional diffusion of income 2. explain the concept of income inequality 3. explain the measures of income inequality 4. explain the measures used to reduce income inequality 5. distinguish between absolute and relative poverty 6. outline factors that contribute to poverty 7. explain why certain categorie s of great deal are more susceptible to poverty than others 8. evaluate the different ship canal used to measure poverty 9. outline strategies used by presidencys to alleviate poverty 10. analyse the economic costs of poverty 1. assess the economic benefits of government intervention to alleviate poverty. CONTENT 1. Size and functional dissemination of income. 2. How income is distributed. 3. Lorenz curve measurement of income inequality and Gini coefficient (interpretation only). 4. Measures to reduce inequality taxes, subsidies, transfers. UNIT 1 MODULE 3 DISTRIBUTION THEORY (contd) 5. Absolute versus relative poverty. 6. Factors that contribute to poverty including a) social and physical environment b) discrimination gender, race c) restrictions on certain economic activities d) non-ownership of resources ) family size f) single parent female- headed families. 7. Persons who are most susceptible to poverty (a)people with special needs i) physically challenged ii) elderly iii) younker iv) single parent families v) indigenous people (b)reasons Limited access to employment, level of training, legislation, availability of income to share among family. 8. Ways used to measure poverty a) basic needs b) poverty line c) head count d) UNDP Human victimisation Index (HDI). UNIT 1 MODULE 3 DISTRIBUTION THEORY (contd) 9. Strategies to alleviate poverty a) transfer payments b) free education and health care ) housing d) minimum wage legislation e) equal employment opportunities f) Government employment creation(special works programmes). 10. The cost of poverty, including a) unemployed tender resources b) lower authorization output c) inefficient allocation of Government expenditure d) social and environmental costs. 11. Economic benefits including a) provision of education and health leading to ripening of human capital b) improvement in well- being as measured by the UNDP (HDI) c) more equitable distribution of income. Suggested Teaching and Learning Activit iesTo facilitate students attainment of the objectives of this Module, teachers are advised to engage students in the teaching and learning activities listed below. 1. Use knowledge from topic 3, unit 1, Theory of Supply, to derive the demand curve for factors of production. 2. Teachers may use graphical representation of the Lorenz Curve to illustrate nonequivalent distribution of income. Teachers should also relate the Lorenz Curve to the GINI coefficient. Also show the effect of taxes on the Lorenz Curve and the GINI coefficient. UNIT 2 MACROECONOMICS MODULE 1 MODELS OF THE MACROECONOMYGENERAL OBJECTIVES On completion of this Module, students should appreciate the notion of case Income accounting and the importance of these accounts for macroeconomic theory and policy 1. understand the views of the true keynesian and monetarists schools 2. understand the factors that influence the level of enthronement in an economy. SPECIFIC OBJECTIVES TOPIC 1 National Income Accounting Stud ents should be able to 1. explain the circular bleed of income 2. explain the concept of National Income Accounting 3. explain the different ways of lineage National Income Accounts 4. nterpret National Income statistics 5. use National Income accounts to analyze the performance on an economy as a whole 6. derive real gross domestic product from nominal GDP 7. explain the limitations of GDP. CONTENT 1. Economic agents. 2. Gross domestic Product (GDP),Gross National Product (GNP) and other measures. 3. Calculation of GDP, GNP and their components (personal income, spendable income), Net National Income (NNI), and per capita income avoidance of double counting. UNIT 2 MODULE 1 MODELS OF THE MACROECONOMY (contd) 4. Total measures a) GDP at market prices b) GDP at factor costs. 5.Use of National income accounts to measure economic performance over clipping and to make inter-country comparisons. 6. Calculation of real and nominal GDP using the price deflator. 7. Limits of National I ncome Accounts as a measure of well-being a) non-inclusion of the informal sector (the underground economy, illegal activities) b) non-payment for do-it-yourself activities c) non-accounting for externalities, environmental degradation (Green GDP) d) the fact that it measures changes in the value of output but not changes in the quality of life. SPECIFIC OBJECTIVES TOPIC 2 Classical models of the MacroeconomyStudents should be able to 1. explain why within the classical model, all employment is voluntary 2. explain how full employment is restored in the classical model 3. explain the factors that influence gather demand 4. explain the factors that influence accumulated supply 5. interpret the classical long run supply curve 6. explain price level determination within the classical model 7. use the classical aggregate demand and supply model to show changes in the price level and employment. UNIT 2 MODULE 1 MODELS OF THE MACROECONOMY (contd) CONTENT 1. Flexibility of wages and pri ces. 2.The role of wage price and interest rate flexibility. 3. The factors that influence aggregate demand a) consumer spending b) investing spending c) Government spending d) net export spending. 4. Factors that influence aggregate supply including changes in input prices and incomes. 5. The assumptions of the vertical aggregate supply curve. 6. The interaction of the classical aggregate demand and supply curves. 7. Shifts in the aggregate demand and aggregate supply curves. SPECIFIC OBJECTIVES TOPIC 3 Basic Keynesian Models Students should be able to 1. explain the utilization function 2. xplain the relationship between saving and consumption 3. calculate the unanalyzable multiplier 4. explain the effect of changes in investment on national income 5. explain the effect of government spending on national income 6. pull the effect of withdrawals and injections on national income UNIT 2 MODULE 1 MODELS OF THE MACROECONOMY (contd) 7. explain the relationship between net exports a nd national income 8. determine the equilibrium level of national income 9. explain swellingary and deflationary gaps. CONTENT 1. self-governing and induced consumption. 2. (a)Income = consumption plus saving. b)marginal propensity to consume and save. (c)average propensity to consume and save. 3. Simple multiplier pic. 4. Relationship between changes in investments and national income. 5. Governments expenditure and its effects on national income. 6. (a)Concepts of injections and withdrawals in an economy. (b)The effect of injections and withdrawals on national income. (c)Small multipliers in the Caribbean context due to leakages. 7. (a)Relationship between net exports (x m) and national income. b) Exports as an injection and imports as a withdrawal. 8. Determination of equilibrium income using a) 45 o line or E=Y ) withdrawals and injections approach c) the Keynesian aggregate demand and supply curves (long run and short run). UNIT 2 MODULE 1 MODELS OF THE MACROECONOMY (contd) 9. (a)Full employment level of output. (b)Actual level of output. (c)Equilibrium level of national income could be either below, at or above latent level of output. SPECIFIC OBJECTIVES TOPIC 4 Investment Students should be able to 1. explain the concept of investment 2. differentiate between the investment demand curve and the investment curve 3. explain the accelerator theory 4. outlinethe factors that account for the volatility of investment.CONTENT 1. Investment (induced and autonomous). 2. (a)Marginal efficiency of capital (investment demand as a function of expected rate of return). b) Marginal efficiency of investment (non-interest grade as determinants of investment demand, taxes, costs, stock of capital goods on hand expectations). 3. Accelerator theory of investment. 4. Determinants of investment a) The accelerator b) Durability c) Irregularity of instauration d) Variability of profits, expectations and interest rates. UNIT 2 MODULE 1 MODELS OF THE MACROECONOMY (contd) S uggested Teaching and Learning ActivitiesTo facilitate students attainment of the objectives of this Module, teachers are advised to engage students in the teaching and learning activities listed below. 1. For topic 1, teachers should pay special attention to the rules of accounting working from the GDP down to consumption and savings. Teachers should also deal with the concepts such as market price and factor costs, as well as real GDP and normal GDP. Make use of the circular menstruum diagram from the closed economy to the open economy. 2. For topic 2, Classical Models of the Macroeconomy, teachers should use graphs to emphasize flexibility and the automatic return to equilibrium. . For topic 3, teachers could demonstrate the routine of the multiplier by using data to show the successive rounds of spending. Calculations and graphical representations of the multiplier are required. 4. Use the 45 line and average demand and average supply to show pretensionary and deflationary ga ps. 5. For topic 4, Investment, teachers may use tables to illustrate and explain the accelerator, that is, the necessity to increase expenditure, constantly, for investment. UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES GENERAL OBJECTIVES On completion of this Module, students should nderstand the reasons why an economy may be characterised by unemployment and how intervention may be used to improve economic performance appreciate the role of the Central Bank in the economy understand monetary and pecuniary policy and their applications understand the nature and upshot of the national debt. SPECIFIC OBJECTIVES TOPIC 1 Unemployment and Inflation Students should be able to 1. explain what is meant by the labour long suit 2. explain the unemployment rate 3. distinguish between unemployment and underemployment 4. evaluate the costs of unemployment 5. explain the causes of unemployment 6. valuate the policies used to reduce unemployment 7. explain the causes of inflation 8. di stinguish between real and nominal variables 9. explain how inflation is measured 10. explain the causes of inflation 11. evaluate the effects of inflation UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) 12. evaluate the policies used to combat inflation 13. explain the relationship between the unemployment rate and inflation. CONTENT 1. Employed and unemployed. 2. The unemployment rate. 3. Unemployment and underemployment. 4. The effect on output, income and growth additional financial tear on the state social costs. . confinement immobility, other market imperfections, structural changes in the economy, inadequate aggregate demand, increase in labour force participation rate, seasonality, intervention. 6. Fiscal policy, monetary policy, wage subsidies, retraining programmes, investment tax credit, employment tax credit, government employment programmes, reducing market imperfections. 7. Inflation general price level. 8. Real and coin wages a) real and nominal GDP b) real and nominal interest rate. 9. The GDP deflator the retail price index the producer price index. Calculations and limitations of the indices. 10.Demand shocks, supply shocks, increase in the funds supply growth rate. 11. The costs and benefits of inflation the impact of redistribution of wealth impact of business activity and growth, impact on the balance of payments. 12. Income policy, monetary policy, fiscal policy and supply side measures. 13. tradeoff between inflation and the rate of unemployment Phillips curve stagflation. UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) SPECIFIC OBJECTIVES TOPIC 2 Monetary Theory and Policy Students should be able to 1. explain the concept of gold 2. outline the functions of capital 3. explain the demand for money . explain the supply of money 5. explain monetary policy 6. explain how the money supply is controlled 7. explain how money is created in the banking system 8. explain why residents substitute contradictory for domestic currency 9. explain the Quantity Theory of Money 10. outline the types of monetary policy 11. imbibe the effects of monetary policy on national income 12. evaluate the limitations of monetary policy. CONTENT 1. (a)The meaning of money. (b)Types of money particular and commodity. 2. Functions of money. 3. (a)Liquidity Preference Theory. (b)Motives for holding money (transactions, precautionary, speculative). UNIT 2MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) 4. The money supply (M1, M2). 5. Monetary policy expansionary and contractionary policies. 6. (a)The role of the central bank in creating high-powered money (monetary base). (b)Instruments of monetary control i) open market operations ii) discount rates iii) financial support fiscal deficits iv) reserve requirements v) moral view vi) interest rates. 7. (a)Excess reserves. (b)Credit creation. (c)The money multiplier. 8. The nature of currency substitution and hoarding. 9. The Quantity Theory of money. 10. (a) Tight monetary policy (inflation). (b)Easy monetary policy (unemployment). c)Balance of payments. 11. How monetary policy affects national income. 12. Limitations of monetary policy including the fact that it is a) permissive, not compelling and only creates the environment UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) b) difficult to control the money supply of outside(prenominal)-owned commercial banks c) difficult to eliminate lags in monetary policy d) weakened by fiscal indiscipline. SPECIFIC OBJECTIVES TOPIC 3 Fiscal Policy Students should be able to 1. explain the concept of fiscal policy 2. outline the goals of fiscal policy 3. explain the nature of the budget 4. xplain the balanced budget multiplier 5. outline methods of financing budget deficits 6. evaluate the limitations of fiscal policy 7. distinguish between discretionary and non-discretionary fiscal policy. CONTENT 1. The meaning of fiscal policy. 2. Fiscal policy as a mover of addressing a) aggregate demand b) unemployment c) inflation d) balance of payments. UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) 3. The nature of the budget a) taxation, revenue, transfer, expenditure b) budget surplus and budget deficit c) balanced budget. 4. Explanation of the balanced budget multiplier. 5.Methods of financing budget deficits including external and domestic borrowing. 6. Lags and potency of fiscal policy. 7. (a)Expansionary and contractionary. (b)Automatic stabilizers. Specific objectives TOPIC 4 Public Debt Students should be able to 1. explain the national debt 2. explain the cause of the national debt 3. evaluate the effects of the national debt on the economy 4. explain the burden of the national debt 5. evaluate ways of reducing the debt burden 6. interpret the debt portion ratio 7. calculate the debt service ratio. UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd) CONTENT 1. The national debt ) stock/flow b) fiscal indiscipline c) domestic and contrasted debt. 2. The causes of the national debt. 3. The effects of the national debt on the economy a) output and investment decisions b) exchange rate pressures c) inflation d) crowding out and crowding in. 4. The responsibility for debt repayment. 1. Management of the national debt a) essential and external borrowing b) taxation c) debt rescheduling d) debt forgiveness. 2. Interpretation of the debt service ratio. 3. Calculation of the debt service ratio (principal plus interest as a percentage of export). UNIT 2 MODULE 2 MACROECONOMIC PROBLEMS AND POLICIES (contd)Suggested Teaching and Learning Activities To facilitate students attainment of the objectives of this Module, teachers are advised to engage students in the teaching and learning activities listed below. 1. For topic 1, Unemployment and Inflation, teachers should use the Phillips Curve to show the relationship between the unemployment rate and inflation rate. 2. For topic 2 (money multiplier), show the various rounds in the m oney expansion process as done in the multiplier. Use Central Bank Acts and Reports for data gathering. 3. For fiscal policy, there is no need for students to derive the balanced budget multiplier.This should only be explained. 4. Teachers should emphasize the causes of the national debt and the burden it places on future generations. UNIT 2 MODULE 3 GROWTH, sustainable DEVELOPMENT AND global RELATIONS GENERAL OBJECTIVES On completion of this Module, students should 1. understand the basic concepts of growth and development 2. understand the impact of imports and exports on the macroeconomy 3. understand the balance of payments accounts and appreciate the causes and consequences of balance of payments crises 4. become aware of the benefits and costs derived from current integration arrangements, such as CARICOM, FTAA and the EU . understand the role and functions of international economic institutions. SPECIFIC OBJECTIVES TOPIC 1 Growth and Sustainable Development Students should b e able to 1. distinguish between growth and development 2. explain the concept of sustainable development 3. outline the factors that determine growth 4. outline the factors that contribute to sustainable development 5. explain the concept of human development 6. anaylse the structural characteristics of Caribbean economies 7. analyse the impact of the regions structural characteristics on sustainable economic development. UNIT 2MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND world-wide RELATIONS (contd) CONTENT 1. Differences between growth and development. 2. Current growth versus the well-being of future generations. 3. Differences between exogenous (technical change) and endogenous growth (capital accumulation, human capital). 4. Economic, social and environmental factors. 5. Indices of human development including mortality rates, literacy, per capita income, life expectancy. 6. Structural characteristics of Caribbean economies including a) small size b) openness c) composition of exports d) resource base e) poverty f) economic dependence. . Implications for regional economies a) dependence on aid b) preferential trade agreements c) foreign direct investment (FDI) d) vulnerability to natural and man-made change e) changes in world prices. UNIT 2 MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND global RELATIONS (contd) SPECIFIC OBJECTIVES TOPIC 2 internationalistic profession Students should be able to 1. analyse the role of imports and exports in a small open economy 2. outline the factors that influence exports and imports 3. explain the effects of foreign exchange earnings on a small open economy 4. explain the theory of relative advantage 5. valuate the arguments for protection 6. evaluate the arguments for Trade Liberalisation 7. outline methods of trade protection 8. explain the commodity, footing of trade 9. interpret changes in the commodity terms of trade 10. calculate the commodity, terms. CONTENT 1. The role of exports in creating domestic income and the role of imports in generating income for foreigners. 2. The factors which determine exports and imports including a) international price b) domestic production c) domestic prices and exchange rates d) international economic activity as it affects the tourism market in the Caribbean UNIT 2MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND GLOBAL RELATIONS (contd) e) shifts in international demand and the emergence of substitutes f) changes in International Income. 3. Foreign exchange earnings from exports a) access to capital goods b) the export multiplier c) access to consumer goods d) increase domestic production. 4. The theory of comparative advantage. 5. Arguments for protection including a) infant industries b) employment c) food security. 6. Arguments for Trade Liberalisation including access to technology, availability of cheaper goods and services. Application of the theory of comparative advantage. . Methods of protection including tariffs, quotas and other non-tariff met hods. 8. Explanation of the commodity terms of trade. 9. Interpretation of changes in the commodity terms of trade. 10. Export price index divided by import price index multiplied by 100. UNIT 2 MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND GLOBAL RELATIONS (contd) SPECIFIC OBJECTIVES TOPIC 3 Balance of Payments and Exchange Rates Students should be able to 1. explain the balance of payments 2. distinguish between the current account and capital account 3. analyze the causes and consequences of balance of payments disequilibria 4. utline the policy measures for correcting balance of payments disequilibria 5. explain exchange rates 6. explain exchange rates determination 7. distinguish between fixed and floating exchange rate regimes 8. describe the effects of the exchange rate changes. CONTENT 1. Explanation of the balance of payments. 2. Capital items and current items. 3. The causes and consequences of balance of payments disequilibria. 4. Policy responses to balance of payments c rises including a) devaluation b) expenditure switching c) expenditure reducing measures. 5. Explanation of exchange rates. 6.Determination of exchange rates. UNIT 2 MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND GLOBAL RELATIONS (contd) 7. Fixed and floating exchange rate systems (fixed, free floating and managed float). 8. The effects of exchange rate changes. SPECIFIC OBJECTIVES TOPIC 4 Economic Integration Students should be able to 1. explain the main forms of economic integration 2. evaluate the costs and benefits of economic integration 3. evaluate the objectives of Caribbean integration 4. analyse the implications of international integration arrangements for Caribbean economies. CONTENT 1. Main forms of economic integration, including ) free trade area b) customs union c) common market d) economic union. 2. The costs and benefits of economic integration including trade creation and trade diversion. 3. The objectives of CARICOM and the rationale for the CARICOM Single Market a nd Economy (CSME). 4. The significance of integration movements, for example European Union (EU) and the North American Free Trade commensurateness (NAFTA) for Caribbean Economies. UNIT 2 MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND GLOBAL RELATIONS (contd) SPECIFIC OBJECTIVES TOPIC 5 International Economic Relations Students should be able to 1. xplain the role and functions of the World Trade Organisation (WTO) 2. explain the role of international financial institutions (IFIs) 3. explain the term multinational (transnational) fellowship 4. explain the nature of foreign direct investment 5. outline the potential benefits and disadvantages of foreign direct investment 6. explain the term globalisation 7. describe the factors responsible for globalisation 8. evaluate the effects of globalisation on development countries. CONTENT 1. The role and functions of the WTO. 2. The role of the IMF and World Bank in the International Financial System. . Explanation of multinational (transna tional) corporation. 4. The nature of foreign direct investment. 5. likely benefits and disadvantages, including a) access to technology and capital b) access to markets c) access to management skills d) repatriation of profits UNIT 2 MODULE 3 GROWTH, SUSTAINABLE DEVELOPMENT AND GLOBAL RELATIONS (contd) e) transfer pricing f) crowding out of domestic businesses. 6. The concept of globalisation. 7. Forces driving globalisation, for example, technological innovation, trade liberalisation, and liberalisation of capital markets. 8.Implications of globalisation for developing countries with particular reference to the greater Caribbean (greater competition, access to markets, access to technology, cheaper prices and greater variety of goods, loss of preferential markets). Suggested Teaching and Learning Activities To facilitate students attainment of the objectives of this Module, teachers are advised to engage students in examining the structure of the economies of the Caribbean and th e problems of imports and exports using international partnership agreements and policies. Teacher should ensure that students could distinguish among ) Terms of Trade b) Balance of Trade and c) Balance of Payments. ? OUTLINE OF ASSESSMENT Each Unit of the syllabus will be assessed separately. The same scheme of assessment will be applied to each Module in each Unit. Grades will be awarded individually for each Unit. Candidate assessment on each Unit will comprise two components i) External Assessment undertaken at the end of the academic year in which the Unit is taken. This component contributes 80% to the candidates overall grade. ii) Internal Assessment undertaken throughout the course of the Unit. This contributes 20% to the candidates overall grade. EXTERNAL ASSESSMENT (80%) wallpaper 01 Forty-five multiple-choice items, fifteen (15) on each Module. 30% (1 hour 30 minutes) Paper 02 The paper consists of three (3) sections comprising six (6) questions spread across 50% (2 hours 30 minutes) all Modules in the Unit.Each section contains two (2) essay type questions from which candidates are required to attempt one (1). INTERNAL ASSESSMENT FOR EACH UNIT