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Summary AP Macroeconomics Exam questions and answers
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AP Macroeconomics Exam questions and answers
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AP Macroeconomics Exam questions andanswers
aggregate demand curve - a curve depicting the relationship between real GDP
demanded (i.e., expenditures) and the price level in the economy; the aggregate
demand curve slopes downward from left to right.
aggregate supply curve - a curve defining the relationship between real
production and price level.
business cycles - fluctuations in real GDP around the trend value; also called
economic fluctuations.
consumer surplus - the difference between the maximum price a consume is (or
would be) willing to pay and the price he or she actually pays.
cost-push inflation - inflation created when an increase in the costs of production
(wages or raw materials) shifts the short-run aggregate supply (AS) curve to the
left; tends to push prices up while reducing the level of real GDP at the same time
(stagflation).
cyclical unemployment - unemployment that reflects changes in the business
cycle; the difference between the official unemployment rate & the natural rate of
unemployment.
,AP Macroeconomics Exam questions and
answers
demand-pull inflation - inflation that follows from an increase in aggregate
demand, which will cause equilibrium real GDP (Y) to increase and the equilibrium
price level (P) to increase.
depreciation - when the price of one currency falls relative to another currency,
the first currency has depreciated relative to the other one.
depression - period in which a recession becomes prolonged and deep, involving
high unemployment.
elastic - significantly responsive to a change in price.
exchange rate - the price of a domestic currency in terms of a foreign currency.
expansion - period in which the economy moves from a trough to a peak and a
real GDP is increasing; also called a boom.
expansionary fiscal policy - enacted when the government deliberately increases
its deficit to stimulate the economy; the government increases its spending
, AP Macroeconomics Exam questions and
answers
(increases G), cuts taxes (decreases T), or both, and stimulates the economy by
expanding aggregate demand (AD).
expansionary monetary policy - monetary policy methods by which the Fed aims
to increase the money supply and lower interest rates, thereby creating an
increase in output; in pursuit of expansionary policy goals, the Fed can lower the
required reserve ratio, lower the discount rate, or purchase government securities
on the open market.
expenditure approach - a way of measuring the GDP by adding up all spending on
final goods and services during a given year.
fiscal policy - changes, adjustments, and strategies that the governments
implements in spending or taxation to achieve particular economic goals.
frictional unemployment - unemployment faced by workers who have lost their
jobs because of changing market (demand) conditions & who have transferable
skills; unemployment due to the natural frictions of the economy.
Gross Domestic Product - the dollar value of production within a nation's border.
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