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Summary AP MACROECONOMICS exam questions
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AP MACROECONOMICS exam questions
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AP MACROECONOMICS exam questionsMacroeconomics Unit 1: Basic Economic Concepts -
Positive Economics - describes the way things are
unemployment rate hit a three year high
Normative Economics - the ways things should be
the fed should lower the federal funds rate
Economics - the study of how to allocate scare resources amount competing ends
Equilibrium in a competitive market - when the quantity demanded is equal to the
quantity supplied of that good
Competitive market - Many buyers and sellers
Identical goods or services
Substitute - Two goods are substitutes if a fall in the price of one of the goods
makes consumers willing to buy the other
,AP MACROECONOMICS exam questions
Complements - Two good are complements if a fall in the price of one good makes
people more willing to buy the other good
Normal Income - When a rise in income increases the demand for a good
Inferior food -
Inferior Good - When a rise in income decreases the demand of the good. it is
inferior good
Scarcity - Individuals, businesses, and governments have unlimited wants but
limited resources.
imputs or factors of production
Consumer Goods vs. Capital Goods ( physical capital) - Consumer goods- (ex:
pizza) goods made for direct consumption
,AP MACROECONOMICS exam questions
Capital goods- (ex: restaurant oven) goods made for indirect consumption. Goods
that make consumer goods
_ manufactured goods that an be used in the production process, including tools,
equipment, buildings, and machinery ( this is often referred to physical capital)
Labor or Human Capital - the physical and mental efforts of people, including
human capital, the knowledge and skills acquired through training and experience
Entrepreneurship - the ability to identify, opportunities and organizer production,
the willingness to accept risk in the pursuit of reward
Natural resources and land - any productive resource existing in nature, including
wild plants, mineral deposits, wind, and water
Trade Offs - ALL possible options given up when you make a choice
Choice -
Opportunity Cost - The ONE best option given up when you make a choice
including the money, time, and forgone opportunities
, AP MACROECONOMICS exam questions
Most desirable Alternative .
Communism - the government owns all the resources in society
designed to minimize imbalance in wealth via the collective ownership of property
divide the available wealth for equal advantage among citizens
lack of incentives for extra effort, risk taking, and innovation
the central government in allocating resources and setting production levels
makes this system particularly vulnerable to corruption
Socialism - system where the government maintains control of specific resources
or markets in society, such as energy, education or healthcare.
goal of fair distribution and the pitfall of inadequate incentives
wages are negotiated between trade unions and managers
a single political party does not rule the economy
Capitalism - individuals and private firms own the resources in society
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