AP Macroeconomics Exam Review
WITH CORRECT SOUTIONS||100%
GUARANTEED PASS||ALREADY A+
GRADED||UPDATED 2026/2027
SYLLABUS||<<NEWEST VERION>>
Structural Unemployment - ANSWER ✓ Unemployment caused by changes in the
structure of demand for goods and in technology; workers who are unemployed
because they do not match what is in demand by producers in the economy or
whose skills have been left behind by economic advancement
Supply Shock - ANSWER ✓ Anything that leads to a sudden, unexpected change
in aggregate supply. Can be negative (decreases AS) or positive (increases AS).
May include a change in energy prices, wages, or business taxes, or may result
from a natural disaster or a new discovery of important resources.
Trade Deficit - ANSWER ✓ When a country's total spending on imported goods
and services exceeds its total revenues from the sale of exports to the rest of the
world. Synonymous with a surplus in the current account of the balance of the
payments and with a negative net export component of the GDP.
Trade Surplus - ANSWER ✓ When a country's sale of exports exceeds its
spending on imports. Synonymous with a surplus in the current account of the
balance of payments.
Wealth - ANSWER ✓ An important determinant of consumption. Wealth is the
total value of a household's assets minus all its liabilities.
aggregate demand curve - ANSWER ✓ 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.
surplus - ANSWER ✓ the difference between the maximum price a consume is (or
would be) willing to pay and the price he or she actually pays.
, demand-pull inflation - ANSWER ✓ 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.
depression - ANSWER ✓ period in which a recession becomes prolonged and
deep, involving high unemployment.
expansion - ANSWER ✓ 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 - ANSWER ✓ enacted when the government
deliberately increases its deficit to stimulate the economy; the government
increases its spending (increases G), cuts taxes (decreases T), or both, and
stimulates the economy by expanding aggregate demand (AD).
expansionary monetary policy - ANSWER ✓ 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.
hyperinflation - ANSWER ✓ This is caused by printing too much money too fast.
a very high rate of inflation, under which prices go up very rapidly, often more
than 1,000 percent in a year. This causes money to become a poor store of value.
import quotas - ANSWER ✓ restrictions on the quantity of a good that can be
imported
inferior good - ANSWER ✓ a good for which there is less demand as income
rises; a good the demand for which falls as income rises and rises as income falls;
consumer income rises while demand decreases. (eg. Spam instead of ham)
labor force - ANSWER ✓ the group of individuals who are either working or
actively looking for work; the labor force includes the unemployed: labor force =
number of individuals in labor force/number of individuals in the adult population,
expressed as a percentage.
, law of demand - ANSWER ✓ states that as prices rise, people are willing and able
to buy less of a good and, hence, the quantity demanded decreases; as prices fall,
people are willing and able to buy more, so the quantity demanded increases and
the demand curve slopes downwards.
law of supply - ANSWER ✓ states that as the price of a good increases, the
quantity supplied of a good increases, and as the price of a good decreases, the
quantity supplied of the good decreases.
marginal revenue - ANSWER ✓ the addition to total revenue created by selling
one additional unit of ouput.
market equilibrium - ANSWER ✓ occurs when supply and demand are balanced
such that the market price and the quantity exchanged are under no market pressure
to change.
movement along a demand curve - ANSWER ✓ movement up or down a single
demand curve, contrasted with movement of the demand curve itself.
nominal GDP - ANSWER ✓ the gross domestic product calculated using current-
year prices (not adjusted for inflation); for example, the nominal GDP for 2001
would calculate the value of production using 2001 prices for goods and services.
Nominal GDP can vary widely from year to year, due to forces such as inflation.
peak - ANSWER ✓ the highest point of a business cycle.
Phillips curve - ANSWER ✓ graphic representation of an inverse relationship
between wage growth (percentage change in price level, such as inflation) and
unemployment.
real GDP - ANSWER ✓ nominal GDP corrected for inflation;
- real GDP is calculated using prices from a given base year, which may not be the
same as the year being measured or the year in which the calculations are made.
Real GDP allows economists to compare changes in production realistically across
years, creating a stable price index so that rising prices in general do not increase
real GDP. Nominal GDP/GDP Deflator x 100
, required reserve ratio (RR) - ANSWER ✓ a specific percentage of checking
account deposits that each bank must keep in liquid, zero-interest reserves; this
amount is set by the Fed.
scarcity - ANSWER ✓ the conflict between limited resources and unlimited
human wants; the basic economic problem facing all societies.
simple money multiplier - ANSWER ✓ 1/RR, where RR is the required reserve
ratio expressed as a decimal; if the required reserve ratio is 10% (0.1), the money
multiplier is 1/0.1 = 10.
SRAS curve - ANSWER ✓ short-run aggregate supply curve
tariff - ANSWER ✓ a special tax imposed on imported goods.
unemployed - ANSWER ✓ a civilian, non-institutionalized adult is considered to
be unemployed when he or she does not have a job but is actively looking for one;
unemployment figures reflect the number of individuals meeting this definition
who are parts of the labor force.
unemployment rate* - ANSWER ✓ the percentage of the civilian labor force that
is unemployed. The number of persons unemployed divided by the number of
persons in the civilian labor force (expressed as a percentage).
discouraged worker - ANSWER ✓ a person who has been unemployed and
searching for a job for so long, that they have given up on finding a job and
therefore forfeit unemployment.
consumption expenditures - ANSWER ✓ the dollar value of all the goods and
services sold to house holds.
government expenditures - ANSWER ✓ the dollar value of goods and services
sold to governments.
trough - ANSWER ✓ the transition point between economic recession and
recovery; the lowest point of a business cycle
WITH CORRECT SOUTIONS||100%
GUARANTEED PASS||ALREADY A+
GRADED||UPDATED 2026/2027
SYLLABUS||<<NEWEST VERION>>
Structural Unemployment - ANSWER ✓ Unemployment caused by changes in the
structure of demand for goods and in technology; workers who are unemployed
because they do not match what is in demand by producers in the economy or
whose skills have been left behind by economic advancement
Supply Shock - ANSWER ✓ Anything that leads to a sudden, unexpected change
in aggregate supply. Can be negative (decreases AS) or positive (increases AS).
May include a change in energy prices, wages, or business taxes, or may result
from a natural disaster or a new discovery of important resources.
Trade Deficit - ANSWER ✓ When a country's total spending on imported goods
and services exceeds its total revenues from the sale of exports to the rest of the
world. Synonymous with a surplus in the current account of the balance of the
payments and with a negative net export component of the GDP.
Trade Surplus - ANSWER ✓ When a country's sale of exports exceeds its
spending on imports. Synonymous with a surplus in the current account of the
balance of payments.
Wealth - ANSWER ✓ An important determinant of consumption. Wealth is the
total value of a household's assets minus all its liabilities.
aggregate demand curve - ANSWER ✓ 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.
surplus - ANSWER ✓ the difference between the maximum price a consume is (or
would be) willing to pay and the price he or she actually pays.
, demand-pull inflation - ANSWER ✓ 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.
depression - ANSWER ✓ period in which a recession becomes prolonged and
deep, involving high unemployment.
expansion - ANSWER ✓ 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 - ANSWER ✓ enacted when the government
deliberately increases its deficit to stimulate the economy; the government
increases its spending (increases G), cuts taxes (decreases T), or both, and
stimulates the economy by expanding aggregate demand (AD).
expansionary monetary policy - ANSWER ✓ 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.
hyperinflation - ANSWER ✓ This is caused by printing too much money too fast.
a very high rate of inflation, under which prices go up very rapidly, often more
than 1,000 percent in a year. This causes money to become a poor store of value.
import quotas - ANSWER ✓ restrictions on the quantity of a good that can be
imported
inferior good - ANSWER ✓ a good for which there is less demand as income
rises; a good the demand for which falls as income rises and rises as income falls;
consumer income rises while demand decreases. (eg. Spam instead of ham)
labor force - ANSWER ✓ the group of individuals who are either working or
actively looking for work; the labor force includes the unemployed: labor force =
number of individuals in labor force/number of individuals in the adult population,
expressed as a percentage.
, law of demand - ANSWER ✓ states that as prices rise, people are willing and able
to buy less of a good and, hence, the quantity demanded decreases; as prices fall,
people are willing and able to buy more, so the quantity demanded increases and
the demand curve slopes downwards.
law of supply - ANSWER ✓ states that as the price of a good increases, the
quantity supplied of a good increases, and as the price of a good decreases, the
quantity supplied of the good decreases.
marginal revenue - ANSWER ✓ the addition to total revenue created by selling
one additional unit of ouput.
market equilibrium - ANSWER ✓ occurs when supply and demand are balanced
such that the market price and the quantity exchanged are under no market pressure
to change.
movement along a demand curve - ANSWER ✓ movement up or down a single
demand curve, contrasted with movement of the demand curve itself.
nominal GDP - ANSWER ✓ the gross domestic product calculated using current-
year prices (not adjusted for inflation); for example, the nominal GDP for 2001
would calculate the value of production using 2001 prices for goods and services.
Nominal GDP can vary widely from year to year, due to forces such as inflation.
peak - ANSWER ✓ the highest point of a business cycle.
Phillips curve - ANSWER ✓ graphic representation of an inverse relationship
between wage growth (percentage change in price level, such as inflation) and
unemployment.
real GDP - ANSWER ✓ nominal GDP corrected for inflation;
- real GDP is calculated using prices from a given base year, which may not be the
same as the year being measured or the year in which the calculations are made.
Real GDP allows economists to compare changes in production realistically across
years, creating a stable price index so that rising prices in general do not increase
real GDP. Nominal GDP/GDP Deflator x 100
, required reserve ratio (RR) - ANSWER ✓ a specific percentage of checking
account deposits that each bank must keep in liquid, zero-interest reserves; this
amount is set by the Fed.
scarcity - ANSWER ✓ the conflict between limited resources and unlimited
human wants; the basic economic problem facing all societies.
simple money multiplier - ANSWER ✓ 1/RR, where RR is the required reserve
ratio expressed as a decimal; if the required reserve ratio is 10% (0.1), the money
multiplier is 1/0.1 = 10.
SRAS curve - ANSWER ✓ short-run aggregate supply curve
tariff - ANSWER ✓ a special tax imposed on imported goods.
unemployed - ANSWER ✓ a civilian, non-institutionalized adult is considered to
be unemployed when he or she does not have a job but is actively looking for one;
unemployment figures reflect the number of individuals meeting this definition
who are parts of the labor force.
unemployment rate* - ANSWER ✓ the percentage of the civilian labor force that
is unemployed. The number of persons unemployed divided by the number of
persons in the civilian labor force (expressed as a percentage).
discouraged worker - ANSWER ✓ a person who has been unemployed and
searching for a job for so long, that they have given up on finding a job and
therefore forfeit unemployment.
consumption expenditures - ANSWER ✓ the dollar value of all the goods and
services sold to house holds.
government expenditures - ANSWER ✓ the dollar value of goods and services
sold to governments.
trough - ANSWER ✓ the transition point between economic recession and
recovery; the lowest point of a business cycle
