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AP Macroeconomics Exam Review
Questions and Answers 100% Pass
Movement on Short-Run Phillips Curve - ✔✔Shift in AD (graph movement is in opposite direction)
Shift of Short-Run Phillips Curve - ✔✔Shift in SRAS (shift is in opposite direction)
Factors of Production - ✔✔1. Land
2. Labor
3. Capital
4. Technology
Shifters of Demand for Loanable Funds - ✔✔1. Incentive to Invest
2. Contractionary Fiscal Policy (to the right)
Shifters of Supply of Loanable Funds - ✔✔1. Incentive to Save
2. Monetary Policy
3. Expansionary Fiscal Policy (to the left)
Shifters of Money Supply - ✔✔Monetary Policy
Federal Reserve Bank
Shifters of Money Demand - ✔✔1. Price Level
2. Income
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3. Fiscal Policy
Shifters of Long-Run Aggregate Supply - ✔✔Increase in Factors of Production
Shifters of Short-Run Aggregate Supply - ✔✔1. Factors of Production (LRAS)
2. Input Costs
3. Supply Shock
Shifters of Aggregate Demand - ✔✔1. GDP (or its components)
2. Monetary Policy
3. Fiscal Policy
PPC Graph - ✔✔Illustrates the production possibilities of 2 products based on amount of resources
available
Demand and Supply Graph - ✔✔
Business Cycle - ✔✔
AD/AS Graph - ✔✔
Money Market Graph - ✔✔
Loanable Funds Graph - ✔✔
GDP = C + I + G + Xn - ✔✔The expenditure approach to measuring GDP correlates well with aggregate
demand (AD)
GDP = W + I + R + P - ✔✔The income approach to measuring GDP correlates well with aggregate supply
Calculating Nominal GDP - ✔✔The quantity of various goods produced in a nation times their current
prices, added together.
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GDP Deflator - ✔✔Price index used to measure inflation
Inflation Rate via the CPI - ✔✔(This year's CPI - Last year's CPI)/(Last year's CPI) x 100.
The inflation rate is the percentage change in the CPI from one period to the next.
Real Interest Rate - ✔✔the interest rate corrected for the effects of inflation;
Unemployment Rate - ✔✔16 or older, actively seeking employment.
Money Multiplier - ✔✔1/RR where RR equals the required reserve ratio. Application: an initial injection
of $1,000 of new money into a banking system with a reserve ratio of 0.1 will generate up to $1,000 x (10)
= $10,000 in total money.
Quantity Theory Of Money - ✔✔MV = PQ = Y. A monetarist's view that explains how changes in the
money supply (M) will affect the price level (P) and/or real output assuming the velocity of money (V) is
fixed in the short run.
MPC + MPS = 1 - ✔✔The fraction of an increase in disposable income that is spent (MPC) plus the
fraction that is saved (MPS) must equal 1.
Spending Multiplier - ✔✔= 1/(1-MPC) or 1/MPS. This tells you how much total spending an initial
interjection of spending in the economy will generate. For example, if the MPC = .8 and the government
spends $100 million, then the total increase in spending in the economy = $100 x 5 = $500 million.
Tax Multiplier = MPC/MPS X Tax decrease - ✔✔This tells you how much total spending will result from
an initial change in the level of taxation. It is negative because when taxes decrease, spending increases,
and vice versa. The tax multiplier will always be smaller than the spending multiplier.
Absolute Advantage - ✔✔Produces more than the other guy or when the country/individual can
produce the good using fewer resources (inputs) than another country/individual.
Emily Charlene © 2025, All Rights Reserved.
AP Macroeconomics Exam Review
Questions and Answers 100% Pass
Movement on Short-Run Phillips Curve - ✔✔Shift in AD (graph movement is in opposite direction)
Shift of Short-Run Phillips Curve - ✔✔Shift in SRAS (shift is in opposite direction)
Factors of Production - ✔✔1. Land
2. Labor
3. Capital
4. Technology
Shifters of Demand for Loanable Funds - ✔✔1. Incentive to Invest
2. Contractionary Fiscal Policy (to the right)
Shifters of Supply of Loanable Funds - ✔✔1. Incentive to Save
2. Monetary Policy
3. Expansionary Fiscal Policy (to the left)
Shifters of Money Supply - ✔✔Monetary Policy
Federal Reserve Bank
Shifters of Money Demand - ✔✔1. Price Level
2. Income
Emily Charlene © 2025, All Rights Reserved.
,2|Page
3. Fiscal Policy
Shifters of Long-Run Aggregate Supply - ✔✔Increase in Factors of Production
Shifters of Short-Run Aggregate Supply - ✔✔1. Factors of Production (LRAS)
2. Input Costs
3. Supply Shock
Shifters of Aggregate Demand - ✔✔1. GDP (or its components)
2. Monetary Policy
3. Fiscal Policy
PPC Graph - ✔✔Illustrates the production possibilities of 2 products based on amount of resources
available
Demand and Supply Graph - ✔✔
Business Cycle - ✔✔
AD/AS Graph - ✔✔
Money Market Graph - ✔✔
Loanable Funds Graph - ✔✔
GDP = C + I + G + Xn - ✔✔The expenditure approach to measuring GDP correlates well with aggregate
demand (AD)
GDP = W + I + R + P - ✔✔The income approach to measuring GDP correlates well with aggregate supply
Calculating Nominal GDP - ✔✔The quantity of various goods produced in a nation times their current
prices, added together.
Emily Charlene © 2025, All Rights Reserved.
, 3|Page
GDP Deflator - ✔✔Price index used to measure inflation
Inflation Rate via the CPI - ✔✔(This year's CPI - Last year's CPI)/(Last year's CPI) x 100.
The inflation rate is the percentage change in the CPI from one period to the next.
Real Interest Rate - ✔✔the interest rate corrected for the effects of inflation;
Unemployment Rate - ✔✔16 or older, actively seeking employment.
Money Multiplier - ✔✔1/RR where RR equals the required reserve ratio. Application: an initial injection
of $1,000 of new money into a banking system with a reserve ratio of 0.1 will generate up to $1,000 x (10)
= $10,000 in total money.
Quantity Theory Of Money - ✔✔MV = PQ = Y. A monetarist's view that explains how changes in the
money supply (M) will affect the price level (P) and/or real output assuming the velocity of money (V) is
fixed in the short run.
MPC + MPS = 1 - ✔✔The fraction of an increase in disposable income that is spent (MPC) plus the
fraction that is saved (MPS) must equal 1.
Spending Multiplier - ✔✔= 1/(1-MPC) or 1/MPS. This tells you how much total spending an initial
interjection of spending in the economy will generate. For example, if the MPC = .8 and the government
spends $100 million, then the total increase in spending in the economy = $100 x 5 = $500 million.
Tax Multiplier = MPC/MPS X Tax decrease - ✔✔This tells you how much total spending will result from
an initial change in the level of taxation. It is negative because when taxes decrease, spending increases,
and vice versa. The tax multiplier will always be smaller than the spending multiplier.
Absolute Advantage - ✔✔Produces more than the other guy or when the country/individual can
produce the good using fewer resources (inputs) than another country/individual.
Emily Charlene © 2025, All Rights Reserved.
