AP MACROECONOMICS: UNIT 1
REVIEW EXAM QUESTIONS AND
ANSWERS. VERIFIED 2025/2026.
Absolute Advantage - ANS Created by Adam Smith, it is the ability of a party to create more
of a good or service than competitors, using the same amount of resources.
Business Cycle - ANS Movement of the economic activity or the real GDP.
-A short-run alternation between economic upturns and downturns
-A country's total product, better known as real gross domestic product (GDP) undergoes
periodic fluctuations
Business-Cycle Peak - ANS The point in a business cycle at which business activity has
reached a temporary maximum; the economy is near or at full employment and the level of real
output is at or very close to the economy's capacity.
Business-Cycle Trough - ANS The point in a business cycle at which business activity has
reached a temporary minimum; the point at which a recession has ended and an expansion
(recovery) begins.
Choice - ANS The decision made by an individual as a result of the scarcity of resources.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Comparative Advantage - ANS Concept in economics that a country should specialize in
producing and exporting only those goods and services which it can produce more efficiently (at
lower opportunity cost) than other goods and services (which it should import).
-An economy that has the lowest opportunity cost for producing a particular good.
Deflation - ANS A decline in the economy's price level.
-encourages people to hold cash rather than invest in new factories and productive
-The annual percentage change in the aggregate price level is negative
Depression - ANS A deep recession with high levels of unemployment.
Economic Growth - ANS Allows a sustained rise in aggregate output. The sources of growth
are increases in resources and progress in technology. Results in the PPC shifting to the right.
Equilibrium - ANS The critical intersection point at which agreement between consumers and
suppliers occurs on products or services.
Equilibrium Price - ANS The price at which consumers and willing to pull out of the market
the exact quantity of product that suppliers are willing to push into the market.
Equilibrium Quantity - ANS The quantity in which consumers are willing to pull out of the
market they same amount as the suppliers are willing to push into the market.
Expansions - ANS A phase of the business cycle when the economy moves from a trough to a
peak.
-An economy has rising total output accompanied by increasing employment.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
REVIEW EXAM QUESTIONS AND
ANSWERS. VERIFIED 2025/2026.
Absolute Advantage - ANS Created by Adam Smith, it is the ability of a party to create more
of a good or service than competitors, using the same amount of resources.
Business Cycle - ANS Movement of the economic activity or the real GDP.
-A short-run alternation between economic upturns and downturns
-A country's total product, better known as real gross domestic product (GDP) undergoes
periodic fluctuations
Business-Cycle Peak - ANS The point in a business cycle at which business activity has
reached a temporary maximum; the economy is near or at full employment and the level of real
output is at or very close to the economy's capacity.
Business-Cycle Trough - ANS The point in a business cycle at which business activity has
reached a temporary minimum; the point at which a recession has ended and an expansion
(recovery) begins.
Choice - ANS The decision made by an individual as a result of the scarcity of resources.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Comparative Advantage - ANS Concept in economics that a country should specialize in
producing and exporting only those goods and services which it can produce more efficiently (at
lower opportunity cost) than other goods and services (which it should import).
-An economy that has the lowest opportunity cost for producing a particular good.
Deflation - ANS A decline in the economy's price level.
-encourages people to hold cash rather than invest in new factories and productive
-The annual percentage change in the aggregate price level is negative
Depression - ANS A deep recession with high levels of unemployment.
Economic Growth - ANS Allows a sustained rise in aggregate output. The sources of growth
are increases in resources and progress in technology. Results in the PPC shifting to the right.
Equilibrium - ANS The critical intersection point at which agreement between consumers and
suppliers occurs on products or services.
Equilibrium Price - ANS The price at which consumers and willing to pull out of the market
the exact quantity of product that suppliers are willing to push into the market.
Equilibrium Quantity - ANS The quantity in which consumers are willing to pull out of the
market they same amount as the suppliers are willing to push into the market.
Expansions - ANS A phase of the business cycle when the economy moves from a trough to a
peak.
-An economy has rising total output accompanied by increasing employment.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
