AP MACROECONOMICS UNIT 3 Questions with Correct Solutions
Question:
1. Aggregate
Answer:
"Added all together" We combine all prices and all quantities
Question:
2. Aggregate Demand
Answer:
All the goods and services (real GDP) that buyers are willing and able to purchase at different
price levels
Question:
3. The Wealth Effect
Answer:
Higher price levels reduce the purchasing power of money and decreases the quantity of
expenditures and vice versa
Question:
4. The Interest Rate Effect
Answer:
When the price level increases, lenders need to charge higher interest rates to get a REAL
return on their loans Higher interest rates decrease C and I spending
Question:
5. Foreign Trade Effect
Answer:
When the United States's prices increase, foreign buyers purchase fewer U.S. goods and
Americans buy more foreign goods Exports down, imports up, real GDP down
Question:
6. What definitely doesn't shift the AD curve?
Answer:
Price
Question:
7. Shifters of Aggregate Demand
, Answer:
C + I + G + Xn
Question:
8. Shifter: Change in Consumer Spending
Answer:
-Increase in disposable income -Consumer expectations -Household indebtedness -Taxes
Question:
9. AD Shifter: Change in Investment Spending
Answer:
-Real interest rates (prices of borrowing money) -Future business expectations -Technology
Question:
10. AD Shifter: Change in Government Spending
Answer:
Government expenditures
Question:
11. AD Shifter: Net Exports
Answer:
-Exchange rates -National income compared to abroad
Question:
12. Aggregate Supply
Answer:
The amount of goods and services (real GDP) that firms will produce in an economy at
different price levels
Question:
13. Short Run Aggregate Supply
Answer:
Wages and resource prices will not increase as price levels increase Curved/upwards sloping
Question:
14. Long Run Aggregate Supply
Answer:
Wages and resource prices will increase as price levels increase Straight line Producing at
full employment
Question:
1. Aggregate
Answer:
"Added all together" We combine all prices and all quantities
Question:
2. Aggregate Demand
Answer:
All the goods and services (real GDP) that buyers are willing and able to purchase at different
price levels
Question:
3. The Wealth Effect
Answer:
Higher price levels reduce the purchasing power of money and decreases the quantity of
expenditures and vice versa
Question:
4. The Interest Rate Effect
Answer:
When the price level increases, lenders need to charge higher interest rates to get a REAL
return on their loans Higher interest rates decrease C and I spending
Question:
5. Foreign Trade Effect
Answer:
When the United States's prices increase, foreign buyers purchase fewer U.S. goods and
Americans buy more foreign goods Exports down, imports up, real GDP down
Question:
6. What definitely doesn't shift the AD curve?
Answer:
Price
Question:
7. Shifters of Aggregate Demand
, Answer:
C + I + G + Xn
Question:
8. Shifter: Change in Consumer Spending
Answer:
-Increase in disposable income -Consumer expectations -Household indebtedness -Taxes
Question:
9. AD Shifter: Change in Investment Spending
Answer:
-Real interest rates (prices of borrowing money) -Future business expectations -Technology
Question:
10. AD Shifter: Change in Government Spending
Answer:
Government expenditures
Question:
11. AD Shifter: Net Exports
Answer:
-Exchange rates -National income compared to abroad
Question:
12. Aggregate Supply
Answer:
The amount of goods and services (real GDP) that firms will produce in an economy at
different price levels
Question:
13. Short Run Aggregate Supply
Answer:
Wages and resource prices will not increase as price levels increase Curved/upwards sloping
Question:
14. Long Run Aggregate Supply
Answer:
Wages and resource prices will increase as price levels increase Straight line Producing at
full employment
