AP Macroeconomics Exam Latest Update 2024- 2025 250 Questions and 100% Verified Correct Answers Guaranteed A+ At First Attempt
"self-interest" - CORRECT ANSWER: choices aim to maximize satisfaction
5 assumptions - CORRECT ANSWER: 1) scarcity, 2) choices, 3) self interest, 4)
decisions based on marginal costs and benefits, 5) real life can be modeled on graphs
Absolute Advantage - CORRECT ANSWER: The ability to produce more of a good than
all other producers.
allocate - CORRECT ANSWER: distribute
appreciating currency - CORRECT ANSWER: an increase in the value of one currency relative to another currency.
automatic stabilizers - CORRECT ANSWER: fiscal policy mechanisms that
automatically regulate, or stabilize, the economy as it moves through the business cycle. AKA: anything that increases a deficit during a recession, and increases a budget surplus during inflation.
balance of payments - CORRECT ANSWER: the difference between the flow of money
into and out of a country
balance sheet - CORRECT ANSWER: a tabular way to show a bank's assets and
liabilities.
benefits of trade - CORRECT ANSWER: increases wealth because it provides more to both parties than would be possible individually
budget deficit - CORRECT ANSWER: government spending exceeds tax revenue
budget surplus - CORRECT ANSWER: tax revenue exceeds government spending
business cycle - CORRECT ANSWER: the periodic rise and fall in economic activity around its long-term growth trend.
Capital - CORRECT ANSWER: 1) Physical - human-made resource; 2) Human - skills
or knowledge from education/experience
capital (financial) account - CORRECT ANSWER: shows the flow of investment on real or financial assets between a nation and foreigners
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capital goods - CORRECT ANSWER: created for indirect consumption
capitalism - CORRECT ANSWER: an economic system based upon the fundamentals
of private property, freedom, self-interest, and prices.
choice - CORRECT ANSWER: making a decision due to scarcity. Every _____ has an
opportunity cost/trade offs.
circular flow - CORRECT ANSWER: model that shows how households and firms
circulate resources, goods, and incomes through the economy.
Comparative Advantage - CORRECT ANSWER: producer with the lowest opportunity
cost
complement goods - CORRECT ANSWER: positive change in demand for one will
positively impact the other
consumer goods - CORRECT ANSWER: created for direct consumption
consumer price index (CPI) - CORRECT ANSWER: measures the average price level
of the items in the base year market basket. The change in the index measures inflation. [Formula: (price of market basket/price of market basket in base year)x100]
contraction - CORRECT ANSWER: period when real GDP is falling
contractionary fiscal policy - CORRECT ANSWER: decrease government spending or
increase taxes to shift AD to the left to full employment and reduce inflation.
contractionary monetary policy - CORRECT ANSWER: decreases in the money supply
to increase real interest rates, shift AD to the left to full employment and reduce inflation.
crowding-out effect - CORRECT ANSWER: government borrows loans to fund deficit
spending --> increases real interest rate --> crowds out private investors and consumers --> decreases AD (attempt at expansionary policy backfires)
current account - CORRECT ANSWER: This account shows current import and export
payments of both goods and services and investment income sent to foreign investors and investment income received by U.S. citizens who invest abroad.
debt financing - CORRECT ANSWER: A firm's way of raising investment funds by
issuing bonds to the public.
Demand - CORRECT ANSWER: how much of a product consumers are both willing
and able to buy at a certain price
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demand-pull inflation - CORRECT ANSWER: Inflation that results from stronger AD as it increases in the upward-sloping range of AS
depreciating currency - CORRECT ANSWER: A decrease in the value of one currency
relative to another currency
Diminishing marginal utility - CORRECT ANSWER: the more you consume, the less
satisfaction you'll get from each additional unit
discount rate - CORRECT ANSWER: The interest rate on short-term loans from the Fed to commercial banks.
discouraged workers - CORRECT ANSWER: citizens who have been without work for
so long that they become tired of looking for work and drop out of the labor force.Because these citizens are not counted as unemployed, reported unemployment is understated.
disposable income - CORRECT ANSWER: income a consumer has to spend or save
once he/she has paid taxes
double shift - CORRECT ANSWER: when supply and demand shift; price or quantity
will be indeterminate
economics - CORRECT ANSWER: study of choices: how individuals and societies deal with scarcity
Entrepreneurship - CORRECT ANSWER: ambitious leaders that combine land, labor
and capital to create goods and services
equity financing - CORRECT ANSWER: the firm's method of raising funds for
investment by issuing shares of stock to the public
excess reserves - CORRECT ANSWER: The portion of a bank deposit that may be
loaned to borrowers.
exchange rate - CORRECT ANSWER: The amount of one currency you must give up to
get one unit of the second currency.
expansionary fiscal policy - CORRECT ANSWER: Increases in government spending or decreasing taxes to shift AD to the right toward full employment and reduce unemployment.
expansionary monetary policy - CORRECT ANSWER: Increases in the money supply to
decrease real interest rates, shift AD to the right toward full employment and reduce unemployment.
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