AP Macroeconomics Exam Review Questions And Answers
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AP Macroeconomics
Institution
AP Macroeconomics
AP Macroeconomics Exam Review Questions
And Answers
Shifters of Demand for Loanable Funds 1. Incentive to Invest
2. Contractionary Fiscal Policy (to the right)
Shifters of Supply of Loanable Funds 1. Incentive to Save
2. Monetary Policy
3. Expansionary Fiscal Policy (to the left)
Shifters o...
AP Macroeconomics Exam Review Questions
And Answers
Shifters of Demand for Loanable Funds 1. Incentive to Invest
2. Contractionary Fiscal Policy (to the right)
Shifters of Supply of Loanable Funds 1. Incentive to Save
2. Monetary Policy
3. Expansionary Fiscal Policy (to the left)
Shifters of Money Supply Monetary Policy
Federal Reserve Bank
Shifters of Money Demand 1. Price Level
2. Income
3. Fiscal Policy
Shifters of Long-Run Aggregate Supply Increase in Factors of Production
,AP Macroeconomics Exam Review Questions
And Answers
Shifters of Short-Run Aggregate Supply 1. Factors of Production (LRAS)
2. Input Costs
3. Supply Shock
Shifters of Aggregate Demand 1. GDP (or its components)
2. Monetary Policy
3. Fiscal Policy
PPC Graph Illustrates the production possibilities of 2 products based on amount of
resources available
Demand and Supply Graph
Business Cycle
AD/AS Graph
,AP Macroeconomics Exam Review Questions
And Answers
Money Market Graph
Loanable Funds Graph
GDP = C + I + G + Xn The expenditure approach to measuring GDP correlates well with
aggregate demand (AD)
GDP = W + I + R + P The income approach to measuring GDP correlates well with
aggregate supply
Calculating Nominal GDP The quantity of various goods produced in a nation times their
current prices, added together.
GDP Deflator Price index used to measure inflation
Inflation Rate via the CPI (This year's CPI - Last year's CPI)/(Last year's CPI) x 100.
The inflation rate is the percentage change in the CPI from one period to the next.
, AP Macroeconomics Exam Review Questions
And Answers
Real Interest Rate the interest rate corrected for the effects of inflation;
Unemployment Rate 16 or older, actively seeking employment.
Money Multiplier 1/RR where RR equals the required reserve ratio. Application: an initial
injection of $1,000 of new money into a banking system with a reserve ratio of 0.1 will generate
up to $1,000 x (10) = $10,000 in total money.
Quantity Theory Of Money MV = PQ = Y. A monetarist's view that explains how changes
in the money supply (M) will affect the price level (P) and/or real output assuming the velocity
of money (V) is fixed in the short run.
MPC + MPS = 1 The fraction of an increase in disposable income that is spent (MPC)
plus the fraction that is saved (MPS) must equal 1.
Spending Multiplier = 1/(1-MPC) or 1/MPS. This tells you how much total spending an
initial interjection of spending in the economy will generate. For example, if the MPC = .8 and
the government spends $100 million, then the total increase in spending in the economy = $100 x
5 = $500 million.
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