AP Macroeconomics: Final Review Flashcards
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| 5663351435 | Scarcity | The condition of a good or service being finite or limited in quantity. | 0 | |
| 5663356807 | Opportunity Cost | A special kind of trade-off, the value of the next best thing. -What must be given up in order to receive something. | 1 | |
| 5663366777 | Constant Opportunity Cost Increasing Opportunity Cost | Constant: The PPC has a constant slope Increasing: The PPC has a bowed out shape | 2 | |
| 5663374346 | Consumer Goods | Goods bought and used by consumers, rather than by manufacturers for producing other goods. | 3 | |
| 5663380780 | Capital Goods | Manufactured goods used to make other goods and services. | 4 | |
| 5663385365 | Economic System: Command | An economy in which industry is publicly owned and a central authority makes production and consumption decisions. | 5 | |
| 5663395007 | Economic System: Free-market | An economy in which the decisions of individual producers and consumers largely determine what, how ,and for whom to produce with little government involvement in the decisions. | 6 | |
| 5663408806 | Economic System: Mixed | An economic system that allows for the simultaneous operation of publicly and privately owned enterprises -A combination of market, command, and traditional economic systems | 7 | |
| 5663433521 | Draw a production possibilities curve. Label inefficient, efficient, and unattainable. Can you calculate the opportunity cost to go from one point to another? |  | 8 | |
| 5663484282 | Identify the three shifters of the PPC. | -Change in resources -Change in technology -Change in trade Rattata | 9 | |
| 5663498318 | Draw a PPC matching each scenario with tuna and boats. 1. Unemployment rises due to a recession. 2. Increase in consumer demand for tuna. 3. New resources improve the production of boats. | Answer in review | 10 | |
| 5663505898 | Draw the Circular Flow Model. Be sure to label key transfers. |  | 11 | |
| 5663514460 | What is the Law of Demand? If price increases, QD ___ If price decreases, QD ___ | Inverse relationship between price and quantity demanded. decreases, increases | 12 | |
| 5663531193 | What is the Law of Supply? If price increases, QS ___ If price decreases QS ___ | Direct relationship between price and quantity supplied increases, decreases | 13 | |
| 5663545187 | What is a price ceiling? What is a price floor? | Ceiling: A legal cap on prices, the maximum price sellers can sell a product. Floor: Minimum legal price sellers can sell a product. | 14 | |
| 5663564468 | Price ceilings occur ____ the equilibrium and result in a ____ Price floors occur ____ the equilibrium and result in a ____ | Ceilings: below, shortage Floors: above, surplus | 15 | |
| 5663567417 | Subsidy | Government payments to producers to control production or quantity in market | 16 | |
| 5663592002 | Draw a simple supply and demand curve. Where is the equilibrium price and quantity located? If the price is higher than the equilibrium price, will there be a surplus or a shortage? If the price is lower than the equilibrium price, will there be a surplus or a shortage? | 1. If price is higher, there will be a surplus. 2. If price is lower, there will be a shortage |  | 17 |
| 5663609597 | Using the expenditures approach, what does GDP equal? What do the letters stand for? | GDP= C+I+G+Xn C= consumer spending I= investment spending G= government spending Xn= net exports (exports-imports) | 18 | |
| 5663624612 | What are the three things not included in GDP? | -Intermediate goods and services -Non-production transactions -Non-market activities (ngita) | 19 | |
| 5663641974 | Draw the business cycle and label the peak, recession, trough, and expansion |  | 20 | |
| 5663653596 | What does the unemployment rate equal? | UR= # of unemployed/labor force x 100% | 21 | |
| 5663660977 | True or false: Investment spending is spending on financial assets like stocks and bonds. | False | 22 | |
| 5663667375 | True or false: Transfer payments are not counted in the calculation of GDP. | True | 23 | |
| 5663672938 | True or false: If the nominal GDP increases, then the economy is experiencing inflation. | False | 24 | |
| 5663672939 | True or false: If the nominal GDP increases, then the economy is experiencing growth. | False | 25 | |
| 5663683907 | True or false: An economy is not at full employment unless there is 0% unemployment | False | 26 | |
| 5663691549 | True or false: Countries that have generous unemployment benefits have higher rates of unemployment | True | 27 | |
| 5663698964 | True or false: Fast-food workers who are replaced by kiosks are considered structurally unemployed | True | 28 | |
| 5663704532 | Define the natural rate of unemployment. In the U.S., full employment is considered to be between ___% and ___% | The unemployment rate that arises from the effects of frictional plus structural unemployment. -4 and 5 | 29 | |
| 5663718476 | The economy is at full employment when there is no ____ unemployment. | Cyclical | 30 | |
| 5663724808 | Does this shift AD or AS? Consumer spending | AD | 31 | |
| 5663727172 | Does this shift AD or AS? Investment spending | AD | 32 | |
| 5663731062 | Does this shift AD or AS? Government spending | AD | 33 | |
| 5663731063 | Does this shift AD or AS? Net exports | AD | 34 | |
| 5663734368 | Does this shift AD or AS? Resource prices | AS | 35 | |
| 5663737963 | Does this shift AD or AS? Government actions (Regulation, taxes, subsidies) | AS | 36 | |
| 5663737964 | Does this shift AD or AS? Productivity | AS | 37 | |
| 5663755141 | Using AD-AS models, draw an economy in a recession and an economy with inflation |  | 38 | |
| 5663773101 | In the long-run of a recessionary gap, wages will ____ and aggregate supply will ____ In the long-run of an inflationary gap, wages will ____ and aggregate supply will ____ | -decrease, increase -increase, decrease | 39 | |
| 5663790972 | If fiscal policy is used to close a recessionary gap, the central bank could ____ spending or ____ taxes. If fiscal policy is used to close an inflationary gap, the central bank could ____ spending or ____ taxes. | -increase, decrease -decrease, increase | 40 | |
| 5663805860 | What is the spending multiplier? The tax multiplier? | Spending multiplier: 1/MPS or 1/(1-MPC) Tax multiplier: MPC/MPS or I/MPS -1 | 41 | |
| 5663833864 | $30 B gap -What is the least amount of G that will close the gap if MPC equals 0.5? | $15 B | 42 | |
| 5663841019 | $30 B gap -How much could the government cut taxes to close the gap if MPC equals 0.8? | $7.5 B | 43 | |
| 5663847310 | $30 B gap -How much could government cut taxes to close the gap if MPS equals 0.1? | $3.33 B | 44 | |
| 5663856472 | Deficit spending: If government spending increases without increasing taxes, the annual deficit ____ and national debt ____. | Increases, increases | 45 | |
| 5663858712 | Time Lags | Congress takes time to decide and implement policy. | 46 | |
| 5663867456 | Crowding Out: Quantity of loanable funds ____ and interest rates ____ | decreases, increases/ go up | 47 | |
| 5663872735 | What happens to aggregate supply when people expect inflation? Workers will seek higher wages, costs of production will ____, causing AS to ____. | Supply of the good decreases. -Go up/increase, decrease | 48 | |
| 5663898495 | Draw and label an AS-AD model showing full employment marking the equilibrium point A. Draw and label the short and long run Phillips Curve and label point A. Show the result of a negative supply shock on both graphs and label the equilibrium point B. | | 49 | |
| 5663906270 | If interest rates fall, investment ____, causing capital stock to ____ and economic growth to ____. | Increases, increase, increase | 50 | |
| 5663933768 | If interest rates go up, investment ____, causing capital stock to ____ and economic growth to ____ | Decrease, decrease, decrease | 51 | |
| 5663944912 | True or false: An increase in consumer spending leads to more economic growth. | False | 52 | |
| 5663951404 | True or false: Crowding out due to deficit spending causes less economic growth. | True | 53 | |
| 5663958782 | True or false: When the LRAS shifts right the natural rate of unemployment increases. | False | 54 | |
| 5663963968 | True or false: A sustained increase in productivity causes both the LRAS and PPC curve to shift to the right. | True | 55 | |
| 5663968262 | True or false: Economic growth is not dependent on how much people save or how much businesses invest, only how much they consume. | False | 56 | |
| 5663973223 | True or false: Increases in both the quality or quantity of the factors of production will cause economic growth. | True | 57 | |
| 5664027550 | What are the three functions of money? | Medium of exchange Store of value Unit of account | 58 | |
| 5664030931 | What are the three types of money? | Commodity money Representative money Fiat Money | 59 | |
| 5664036460 | Define commodity money. Provide examples. | A good used as a medium of exchange that has intrinsic value in other uses. Ex: gold, silver, cigarettes in World War II | 60 | |
| 5664047927 | Define representative money. Provide examples. | Commodity-backed money; Money with no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods. Ex: silver certificate | 61 | |
| 5664057312 | Define fiat money. Provide examples. | Money whose value derives entirely from its official status as a means of payment. Ex: U.S. dollar bill | 62 | |
| 5664064082 | Draw and label the money market graph. |  | 63 | |
| 5664075405 | When the interest rate increases, the quantity of money demanded ____. | Decreases | 64 | |
| 5664080100 | When the interest rate decreases, the quantity of money demanded ____. | Increases | 65 | |
| 5664090146 | What does the Federal Reserve do and what types of policy do they use? | The Federal Reserve oversees and regulates the banking system and controls the monetary base. -It uses monetary policy. | 66 | |
| 5664098753 | The FED is the ____ of the United States | Central bank | 67 | |
| 5664101274 | What is the money multiplier equal to? | 1/reserve requirement | 68 | |
| 5664109102 | RR= 10%, the FED buys $10 billion worth of bonds MS will ___ by ___ billion. | Increases, $100 billion | 69 | |
| 5664116674 | RR= 20%, the FED sells $5 billion worth of bonds MS will ___ by ___ billion. | Decrease, $25 billion | 70 | |
| 5664126193 | RR= 25%, the FED sells $2 billion worth of bonds MS will ___ by ___ billion. | Decrease, $8 billion | 71 | |
| 5664133867 | RR= 5%, the FED buys 5 billion worth of bonds MS will ___ by ___ billion. | Increase, $100 billion | 72 | |
| 5664174160 | When the economy is in a recession and the FED uses monetary policy to close the gap... MS __ -> ir ___ -> I ___ and C ___ -> AD ___ | increase, decrease, increase, increase, increase | 73 | |
| 5664178117 | When the economy is in an inflation and the FED uses monetary policy to close the gap... MS __ -> ir ___ -> I ___ and C ___ -> AD ___ | decrease, increase, decrease, decrease, decrease | 74 | |
| 5664183971 | Draw a FOREX model for USD relative to CAD |  | 75 | |
| 5664189049 | What are the four shifters of the FOREX model? | Changes in tastes and preferences, income, price level, and interest rates | 76 | |
| 5664201699 | Draw the foreign exchange market for euros. show what happens to the value of euros relative to the USD if interest rates n Europe increase | | 77 | |
| 5664217671 | If U.S. tourists increase visits to Japan... USD ___ and YEN ___ | Depreciates, appreciates | 78 | |
| 5664224882 | If the U.S. government significantly decreases personal income taxes... USD ___ and YEN ___ | Depreciates, appreciates | 79 | |
| 5664231443 | If inflation in Japan rises significantly faster than is the U.S... USD ___ and YEN ___ | Appreciates, depreciates | 80 | |
| 5664239133 | If Japan has a large budget deficit that increases interest rates in Japan... USD ___ and YEN ___ | Depreciates, appreciates | 81 | |
| 5664347810 | If Japan places high tariffs on all U.S. imports... USD ___ and YEN ___ | Depreciates, appreciates | 82 | |
| 5664355250 | If the U.S. suffers a significant recession... USD ___ and YEN ___ | Appreciates, depreciates | 83 |