AP Macroeconomics

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Transcript AP Macroeconomics

AP Macroeconomics
In-Class Final Exam Review
Economic growth
• A sustained increase in real per capita GDP
• stimulate economic growth - Technological
exchange rate
• The price of nation’s currency
• e.g. If a Japanese firm buys cars from the
United States, there would be an increase in
which of the following in the foreign exchange
market (demand for US dollars and supply of
• Impact of high inflation in a given country?
• Absolute v Comparative advantage
– with PPC
• Comparative advantage implies that two
countries should benefit from trade (unless
both have equal opportunity costs in every
Nominal v Real
• Real interest rate = Nominal – inflation
• Nominal interest rate = Real + inflation
• Nominal rate of increase v real (with % change
fiscal policy
• government expenditures
• taxes
• most expansionary
– Cut taxes & increase government spending
Monetary policy
• Contraction to fight inflation (higher interest
• Expansion to fight recession (lower interest
• Increasing the reserve requirement – Fed
reduces the ability of the banking system to
create money
• Counting gross domestic product - A final
good or service produced in country
• GDP/AD = Consumption, Investment,
Government spending and net exports (Xn)
• impact of a decrease/increase in foreign
income on the aggregate demand in the
United States
short-run Phillips curve
• decrease in unemployment = increase in
• Increase in unemployment = decrease in
• Input costs (e.g. labor wages) rise, supply
shifts left (up)
• decrease in the price of inputs = increase in
the short-run AS and a decrease in the price
national debt
• accumulation of past and current budget
deficits and surpluses
Purchasing power
• A decrease in the purchasing power of the
currency most undermines the ability of a
nation’s currency to store value
Types of unemployment
• Cyclical unemployment
• Frictional unemployment e.g. recent graduate
who is looking for her first job
• Structural unemployment
• Problems measuring unemployment discouraged workers