AP Macroeconomics Exam questions with correct answers

aggregate demand curve CORRECT 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. aggregate supply curve CORRECT ANSWER a curve defining the relationship between real production and price level. business cycles CORRECT ANSWER fluctuations in real GDP around the trend value; also called economic fluctuations. consumer surplus CORRECT ANSWER the difference between the maximum price a consume is (or would be) willing to pay and the price he or she actually pays. cost-push inflation CORRECT ANSWER inflation created when an increase in the costs of production (wages or raw materials) shifts the short-run aggregate supply (AS) curve to the left; tends to push prices up while reducing the level of real GDP at the same time (stagflation). cyclical unemployment CORRECT ANSWER unemployment that reflects changes in the business cycle; the difference between the official unemployment rate & the natural rate of unemployment. demand-pull inflation CORRECT 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.