AP Macroeconomics Exam Questions Marking Scheme New Update (Verified A+ Pass)
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AP Macroeconomics
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AP Macroeconomics
AP Macroeconomics Exam Questions Marking Scheme New Update (Verified A+ Pass)
Movement on Short-Run Phillips Curve - Answers - Shift in AD (graph movement is in opposite direction)
Shift of Short-Run Phillips Curve - Answers - Shift in SRAS (shift is in opposite direction)
Shift of Long-Ru...
AP Macroeconomics Exam Questions
Marking Scheme New Update
(Verified A+ Pass)
Movement on Short-Run Phillips Curve - Answers -✔✔ Shift in AD (graph movement is
in opposite direction)
Shift of Short-Run Phillips Curve - Answers -✔✔ Shift in SRAS (shift is in opposite
direction)
Shift of Long-Run Phillips Curve - Answers -✔✔ Factors of Production/Shift in LRAS
(shift is in opposite direction)
Factors of Production - Answers -✔✔ 1. Land
2. Labor
3. Capital
4. Technology
5. Sometimes Foreign Trade
Shifters of Demand for Loanable Funds - Answers -✔✔ 1. Incentive to Invest
2. Contractionary Fiscal Policy (to the right)
Shifters of Supply of Loanable Funds - Answers -✔✔ 1. Incentive to Save
2. Monetary Policy
3. Expansionary Fiscal Policy (to the left)
Shifters of Money Supply - Answers -✔✔ Monetary Policy
Shifters of Money Demand - Answers -✔✔ 1. Price Level
2. Income
3. Fiscal Policy
Shifters of Long-Run Aggregate Supply - Answers -✔✔ Factors of Production
Shifters of Short-Run Aggregate Supply - Answers -✔✔ 1. Factors of Production
(LRAS)
2. Input Costs
3. Supply Shock
Shifters of Aggregate Demand - Answers -✔✔ 1. GDP (or its components)
2. Monetary Policy
3. Fiscal Policy
,PPC Graph - Answers -✔✔
Demand and Supply Graph - Answers -✔✔
Business Cycle - Answers -✔✔
Short Run AD/AS Graph - Answers -✔✔
Money Market Graph - Answers -✔✔
Loanable Funds Graph - Answers -✔✔
Investment Demand Graph - Answers -✔✔
Foreign Exchange Graph - Answers -✔✔
Phillips Curve - Answers -✔✔
GDP = C + I + G + Xn - Answers -✔✔ The expenditure approach to measuring GD
correlates well with aggregate demand (AD)
GDP = W + I + R + P - Answers -✔✔ The income approach to measuring GDP
correlates well with aggregate supply
Calculating Nominal GDP - Answers -✔✔ The quantity of various goods produced in a
nation times their current prices, added together.
GDP Deflator - Answers -✔✔ A price index used to adjust nominal GDP to arrive at
real GDP. Called the "deflator" because nominal GDP will usually overstate the value of
a nation's output if there has been inflation. The Consumer Price Index (CPI) is another
commonly used price index.
GDP Growth Rate: - Answers -✔✔ ( Current year's GDP - Last year's GDP)/ (Last
year's GDP) x 100. The GDP growth rate is a percentage change in a nation's real
output between one year and the next.
The Inflation Rate via the CPI - Answers -✔✔ (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.
Real Interest Rate - Answers -✔✔ the interest rate corrected for the effects of inflation;
Nominal interest rate - inflation rate
, Unemployment Rate - Answers -✔✔ (Number of unemployed/Number in the labor
force) x 100. The labor force includes all non-institutionalized people of working age
who are employed or seeking employment.
Money Multiplier - Answers -✔✔ 1/RRR where RRR 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 - Answers -✔✔ 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 - Answers -✔✔ The fraction of an increase in disposable income that
is spent (MPC) plus the fraction that is saved (MPS) must equal 1.
Spending Multiplier - Answers -✔✔ = 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.
Tax Multiplier = (-MPC)/MPS - Answers -✔✔ This tells you how much total spending
will result from an initial change in the level of taxation. It is negative because when
taxes decrease, spending increases, and vice versa. The tax multiplier will always be
smaller than the spending multiplier.
Absolute Advantage - Answers -✔✔ A country or individual has an absolute advantage
in the production of a good when the country can produce the good using fewer
resources (inputs) than another country or individual.
Appreciation - Answers -✔✔ An increase in the value of one currency relative to
another, resulting from an increase in demand for or a decrease in supply of the
currency on the foreign exchange market.
Balance Of Payments - Answers -✔✔ Measures all the monetary exchanges between
one nation and all other nations. Includes the current account and the capital account.
Bonds - Answers -✔✔ A certificate of debt issued by a company or government to an
investor.
Budget Deficit - Answers -✔✔ When a government spends more than it collects in tax
revenues in a given year.
Capital - Answers -✔✔ Human-made resources (machinery and equipment) used to
produce goods and services; goods that do not directly satisfy human wants.
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