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AP Macroeconomics Review Exam Questions and Answers
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AP Macroeconomics Review Exam Questions and Answers
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AP Macroeconomics Review ExamQuestions and Answers
Scarcity - Answers -Individuals, businesses, and governments have unlimited wants but
limited resources.
Consumer Goods - Answers -Made for direct consumption (pizza).
Capital Goods - Answers -Made for indirect consumption, makes consumer goods
(pizza oven).
Trade Offs - Answers -All possible options given up when you make a choice.
Opportunity Cost - Answers -The one best option given up when you make a choice
including the money, time, and foregone opportunities.
Centrally Planned Economics - Answers -Economic system where the government
owns the resources and decides what to make, how to make it, and who gets it. Total
control of the economy.
Free-Market Economics (Capitalism) - Answers -Economic system where individual
citizens own the resources and decide what to make, how to make it, and who gets it.
Little or no government involvement.
Mixed Economies - Answers -Almost all economies are a mixture of Centrally Planned
and Free-Market economic systems.
Production Possibility Curve (Frontier): Unemployment/Inefficiency Point - Answers -
Inside the graph
Production Possibility Curve (Frontier): Efficient Point - Answers -On the graph
Production Possibility Curve (Frontier): Impossible (given current resources) Point -
Answers -Outside the graph
Production Possibility Curve (Frontier): Constant Opportunity Cost - Answers -Straight
Line
, Production Possibility Curve (Frontier): Increasing Opportunity Cost - Answers -Bowed-
Out Curve
Investment - Answers -Business spending on capital (tools & machinery) that make
businesses more productive.
Capital Stock - Answers -The amount of capital businesses have. The more stock, the
more output they can produce.
Three Shifters of the PPC - Answers -1. Change in resource quantity or quality
2. Change in technology
3. Change in trade
Absolute and Comparative Advantage: Output Questions (Calculating Opportunity Cost)
- Answers -Other Goes Over
Absolute and Comparative Advantage: Input Questions (Calculating Opportunity Cost) -
Answers -Other Goes Under
Absolute Advantage (Output and Input) - Answers -The country (producer) with the
largest number in that category (both output and input).
Comparative Advantage (Output and Input) - Answers -Country (producer) with the
lowest opportunity cost.
Product Market - Answers -Places where individuals buy goods/services from
businesses.
Factor (Resource) Market - Answers -Places where businesses buy the factors of
production from individuals (L,L,C,E).
Factor Payment - Answers -Payments made by businesses. Rent for land, wages for
labor, interest for capital.
Transfer Payment - Answers -Payments made by the government to meet specific goals
rather than pay for goods and services (to the people, welfare, etc.).
Law of Demand - Answers -Inverse relationship between price and quantity demanded
(why the AD is a downward slope).
Law of Supply - Answers -Direct relationship between price and quantity supply (why
the SRAS is an upward slope).
Change in Quantity Demanded - Answers -Movement along the curve due to a change
in price.
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