AP Macroeconomics PASSED Actual Exam
Questions and CORRECT Answers
Economics - CORRECT ANSWER- ✔✔The social science that studies how individuals,
institutions, and society make the optimal best choices under conditions of scarcity
Microeconomics - CORRECT ANSWER- ✔✔Specific units in the economy (ex: how prices
and output are determined for products and how customers react to price changes)d
Macroeconomics - CORRECT ANSWER- ✔✔the study of economy-wide phenomena,
including inflation, unemployment, and economic growth
Positive Economics - CORRECT ANSWER- ✔✔Investigates facts or cause-and-effect
relationships; the right answer
Normative Economics - CORRECT ANSWER- ✔✔Objective views of what ought to be or
what policies should be used to address an economic issue
Production Possibilities Curve (PPC) - CORRECT ANSWER- ✔✔A graph that shows the
various combinations of output that the economy can produce of two products, given the
available factors of production and the available production technology.
Budget Line - CORRECT ANSWER- ✔✔A line that shows the different combinations of two
products a consumer can purchase with a specific money income, given the products' prices.
Land - CORRECT ANSWER- ✔✔Natural resources
Labor - CORRECT ANSWER- ✔✔The contributed time and abilities of people who are
producing goods and services
Capital - CORRECT ANSWER- ✔✔The machines, tools, and equipment used to make other
goods and services
,Laizzez-Faire Economics - CORRECT ANSWER- ✔✔An economic system where
government should not interfere in the marketplace
Command System - CORRECT ANSWER- ✔✔A method of organizing an economy in
which property resources are publicly owned and government uses central economic planning
to direct and coordinate economic activities; command economy; communism
Market System - CORRECT ANSWER- ✔✔All the product and resource markets of a
market economy and the relationships among them; a method that allows the prices
determined in those markets to allocate the economy's scarce resources and to communicate
and coordinate the decisions made by consumers, firms, and resource suppliers
Circular Flow Diagram - CORRECT ANSWER- ✔✔
Economic System - CORRECT ANSWER- ✔✔A set of institutions and a coordinating
mechanism to respond to the economizing problem for an economy
Competition - CORRECT ANSWER- ✔✔The struggle among producers for the dollars of
consumers
Market - CORRECT ANSWER- ✔✔Any arrangement that allows buyers and sellers to
exchange things
Division of Labor/Specialization - CORRECT ANSWER- ✔✔When workers devote
themselves to doing what they're best at, increasing the efficiency of the firm and of the
economy
Money - CORRECT ANSWER- ✔✔Anything that serves as a medium of exchange, a unit of
account, and a store of value
"Invisible Hand" - CORRECT ANSWER- ✔✔The term economists use to describe the self-
regulating nature of the marketplace
Households - CORRECT ANSWER- ✔✔One or more persons occupying a housing unit
, Businesses - CORRECT ANSWER- ✔✔Economic entities (firms) that purchase resources
and provide goods and services to the economy.
Sole Proprietorship - CORRECT ANSWER- ✔✔Business owned and operated by a single
person
Corporation - CORRECT ANSWER- ✔✔A business owned by stockholders who share in its
profits but are not personally responsible for its debts
Product Market - CORRECT ANSWER- ✔✔The market in which households purchase the
goods and services that firms produce
Resource Market - CORRECT ANSWER- ✔✔A market in which households sell and firms
buy resources or the services of resources
Demand - CORRECT ANSWER- ✔✔Consumer willingness and ability to buy products
Supply - CORRECT ANSWER- ✔✔The amount of goods available
Quantity Demanded - CORRECT ANSWER- ✔✔The amount of a good or service that a
consumer is willing and able to purchase at a given price
Quantity Supplied - CORRECT ANSWER- ✔✔The amount a supplier is willing and able to
supply at a certain price
Equilibrium Price - CORRECT ANSWER- ✔✔The price that balances quantity supplied and
quantity demanded, it tends to prevail in the market
Demand Curve - CORRECT ANSWER- ✔✔A graph of the relationship between the price of
a good and the quantity demanded
Questions and CORRECT Answers
Economics - CORRECT ANSWER- ✔✔The social science that studies how individuals,
institutions, and society make the optimal best choices under conditions of scarcity
Microeconomics - CORRECT ANSWER- ✔✔Specific units in the economy (ex: how prices
and output are determined for products and how customers react to price changes)d
Macroeconomics - CORRECT ANSWER- ✔✔the study of economy-wide phenomena,
including inflation, unemployment, and economic growth
Positive Economics - CORRECT ANSWER- ✔✔Investigates facts or cause-and-effect
relationships; the right answer
Normative Economics - CORRECT ANSWER- ✔✔Objective views of what ought to be or
what policies should be used to address an economic issue
Production Possibilities Curve (PPC) - CORRECT ANSWER- ✔✔A graph that shows the
various combinations of output that the economy can produce of two products, given the
available factors of production and the available production technology.
Budget Line - CORRECT ANSWER- ✔✔A line that shows the different combinations of two
products a consumer can purchase with a specific money income, given the products' prices.
Land - CORRECT ANSWER- ✔✔Natural resources
Labor - CORRECT ANSWER- ✔✔The contributed time and abilities of people who are
producing goods and services
Capital - CORRECT ANSWER- ✔✔The machines, tools, and equipment used to make other
goods and services
,Laizzez-Faire Economics - CORRECT ANSWER- ✔✔An economic system where
government should not interfere in the marketplace
Command System - CORRECT ANSWER- ✔✔A method of organizing an economy in
which property resources are publicly owned and government uses central economic planning
to direct and coordinate economic activities; command economy; communism
Market System - CORRECT ANSWER- ✔✔All the product and resource markets of a
market economy and the relationships among them; a method that allows the prices
determined in those markets to allocate the economy's scarce resources and to communicate
and coordinate the decisions made by consumers, firms, and resource suppliers
Circular Flow Diagram - CORRECT ANSWER- ✔✔
Economic System - CORRECT ANSWER- ✔✔A set of institutions and a coordinating
mechanism to respond to the economizing problem for an economy
Competition - CORRECT ANSWER- ✔✔The struggle among producers for the dollars of
consumers
Market - CORRECT ANSWER- ✔✔Any arrangement that allows buyers and sellers to
exchange things
Division of Labor/Specialization - CORRECT ANSWER- ✔✔When workers devote
themselves to doing what they're best at, increasing the efficiency of the firm and of the
economy
Money - CORRECT ANSWER- ✔✔Anything that serves as a medium of exchange, a unit of
account, and a store of value
"Invisible Hand" - CORRECT ANSWER- ✔✔The term economists use to describe the self-
regulating nature of the marketplace
Households - CORRECT ANSWER- ✔✔One or more persons occupying a housing unit
, Businesses - CORRECT ANSWER- ✔✔Economic entities (firms) that purchase resources
and provide goods and services to the economy.
Sole Proprietorship - CORRECT ANSWER- ✔✔Business owned and operated by a single
person
Corporation - CORRECT ANSWER- ✔✔A business owned by stockholders who share in its
profits but are not personally responsible for its debts
Product Market - CORRECT ANSWER- ✔✔The market in which households purchase the
goods and services that firms produce
Resource Market - CORRECT ANSWER- ✔✔A market in which households sell and firms
buy resources or the services of resources
Demand - CORRECT ANSWER- ✔✔Consumer willingness and ability to buy products
Supply - CORRECT ANSWER- ✔✔The amount of goods available
Quantity Demanded - CORRECT ANSWER- ✔✔The amount of a good or service that a
consumer is willing and able to purchase at a given price
Quantity Supplied - CORRECT ANSWER- ✔✔The amount a supplier is willing and able to
supply at a certain price
Equilibrium Price - CORRECT ANSWER- ✔✔The price that balances quantity supplied and
quantity demanded, it tends to prevail in the market
Demand Curve - CORRECT ANSWER- ✔✔A graph of the relationship between the price of
a good and the quantity demanded
