May 20 2009

AP Economics – will it evolve to a changing economic reality?

A.P. Economics vs. Real Life – Economix Blog –

Econ Exams: Are The Correct Answers Still Right? : NPR

Listen to the 3 minute NPR podcast here

It’s interesting to me that AP Economics has gotten two major mentions in the mainstream media recently, both asking the same question: Does high school Economics teach kids about the real world anymore?

Both the New York Times and NPR refer to a past AP Macro multiple choice question, this one from the NYT:

Policy makers concerned about fostering long-run growth in an economy that is currently in a recession would most likely recommend which of the following combinations of monetary and fiscal policy actions?
a. sell bonds…/…reduce taxes
b. sell bonds…/…raise taxes
c. no change…/…raise taxes
d. buy bonds…/…reduce spending
e. buy bonds…/…no change

The correct answer, as readers should know, is e. Buying bonds increases the money supply and lowers interest rates, while choosing not to engage in expansionary fiscal policy means no crowding out of private investment will occur and thus “fostering long-run growth” in the economy.

The NYT blogger writes:

But that answer does not even remotely resemble what policy makers have actually done in response to the current crisis (or, for that matter, in response to previous recessions).

It’s true, the severity of the current recession has forced the government and Fed to create new monetary and fiscal tricks, but the fundamentals behind a response indicated in answer e. still hold true. Lowering interest rates to encourage private investment is a pro-growth policy for correcting a mild recession.

Anyway, I think it’s worth listening to the podcast from NPR and reading the blog post from the NYT. Definitely read the comments on the blog post too, some interesting points are made by readers.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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