AP Macroeconomics Reading and Writing Workshop
Unit Focus: Aggregate Supply and Demand and The Financial Sector
Workshop Format: Group-based inquiry and FRQ writing
Session 1 — Aggregate Supply and Demand
Primary Reading (Public Domain)
John Stuart Mill, Principles of Political Economy (1848)
Full text: https://www.gutenberg.org/files/30107/30107-h/30107-h.htm
Excerpt (Book III, Chapter XV):
“Consumption is the end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”
“Demand for commodities is not demand for labour. It is only demand for commodities that stimulates production, and the power of production depends on the means and motives of those who produce.”
Group Activities
Primary Reading (Public Domain)
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776)
Full text: https://www.gutenberg.org/files/3300/3300-h/3300-h.htm
Excerpt (Book II, Chapter II – “Of Money Considered as a Particular Branch of the General Stock of the Society”):
“The banks and bankers of every country… invent what are called promissory notes… which circulate from hand to hand like cash, and perform all the functions of money.”
“By this operation, the quantity of circulating money is augmented, and the industry of the country increased.”
Group Activities
Whole-Class Seminar (Groups A–H mix into four new teams):
David Ricardo, On the Principles of Political Economy and Taxation (1817)
Full text: https://www.gutenberg.org/files/33310/33310-h/33310-h.htm
(Sections on value and distribution)
Teacher Notes
Grouping Strategy: Rotate groups by concept (markets → money → policy → synthesis).
Assessment: Collect one FRQ per group per session and use peer grading with the AP FRQ rubric.
Extensions: Have students connect readings to current Federal Reserve policy or recent GDP and CPI data.
Workshop Format: Group-based inquiry and FRQ writing
Session 1 — Aggregate Supply and Demand
Primary Reading (Public Domain)
John Stuart Mill, Principles of Political Economy (1848)
Full text: https://www.gutenberg.org/files/30107/30107-h/30107-h.htm
Excerpt (Book III, Chapter XV):
“Consumption is the end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”
“Demand for commodities is not demand for labour. It is only demand for commodities that stimulates production, and the power of production depends on the means and motives of those who produce.”
Group Activities
- Group A – Market Map Makers: Create a visual model showing equilibrium using AD & AS curves. Annotate shifts caused by “consumer confidence” changes from Mill’s text.
- Group B – Textual Translators: Paraphrase Mill’s argument about consumption and production in modern macro terms (AD, AS, GDP). Present as a short skit or infographic.
- Group C – Data Detectives: Use real-world data (for example, FRED GDP and CPI trends) to demonstrate a recent negative demand shock and compare it with Mill’s reasoning.
- Group D – Debate Team: Hold a “Mill vs. Modern Economists” discussion—does consumption truly drive production?
- How does Mill’s statement that “consumption is the end of production” relate to aggregate demand?
- What assumptions does he make about market self-correction?
- Which of his ideas appear in modern AD/AS modeling?
- FRQ 1 – Short Answer: Define Aggregate Demand and Aggregate Supply. Using a labeled AD–AS graph, show and explain the effects of a negative demand shock (such as a decline in consumer confidence) on output and price level.
- FRQ 2 – Extended Response: The government increases infrastructure spending. Using the AD–AS model, explain the short-run and long-run effects on output, employment, and prices. Include discussion of possible crowding-out and productivity gains.
Primary Reading (Public Domain)
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776)
Full text: https://www.gutenberg.org/files/3300/3300-h/3300-h.htm
Excerpt (Book II, Chapter II – “Of Money Considered as a Particular Branch of the General Stock of the Society”):
“The banks and bankers of every country… invent what are called promissory notes… which circulate from hand to hand like cash, and perform all the functions of money.”
“By this operation, the quantity of circulating money is augmented, and the industry of the country increased.”
Group Activities
- Group E – Money Multiplier Builders: Simulate fractional-reserve banking with slips of paper acting as deposits and loans. Calculate total money creation.
- Group F – Historical Investigators: Trace the evolution of banking from Smith’s time to modern central banks. Create a timeline mural.
- Group G – Policy Analysts: Model an open-market operation: what happens when the Federal Reserve buys government bonds? Show impacts on money supply, interest rates, and investment.
- Group H – Comparative Commentators: Compare Smith’s description of money creation to the modern concept of monetary policy transmission. Write a short joint commentary paragraph.
- How does Smith conceptualize money’s role in economic activity?
- What functions of modern banks can be seen in Smith’s explanation?
- How might Smith view the Federal Reserve’s role today?
- FRQ 3 – Short Answer: Explain how fractional-reserve banking creates money. Provide a numerical example showing how a $1,000 deposit and a 10% reserve ratio expand the money supply.
- FRQ 4 – Extended Response: The Federal Reserve conducts an open-market purchase of government bonds. Explain the chain reaction affecting money supply, interest rates, investment, and GDP in both the short and long run.
Whole-Class Seminar (Groups A–H mix into four new teams):
- Compare classical economic thought (Mill and Smith) with modern macro frameworks.
- Discuss: How have financial institutions evolved since Smith’s time?
- Identify one classical insight that remains relevant today.
David Ricardo, On the Principles of Political Economy and Taxation (1817)
Full text: https://www.gutenberg.org/files/33310/33310-h/33310-h.htm
(Sections on value and distribution)
Teacher Notes
Grouping Strategy: Rotate groups by concept (markets → money → policy → synthesis).
Assessment: Collect one FRQ per group per session and use peer grading with the AP FRQ rubric.
Extensions: Have students connect readings to current Federal Reserve policy or recent GDP and CPI data.