AP Macroeconomics Exam Questions All Solved New Update (Verified A+ Pass)
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AP Macroeconomics
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AP Macroeconomics
AP Macroeconomics Exam Questions All Solved New Update (Verified A+ Pass)
Circular flow - Answers - A model that shows how households and firms circulate resources, good, and incomes through the economy. This basic model is expanded to include the government and the foreign sector.
Closed eco...
AP Macroeconomics Exam
Questions All Solved New Update
(Verified A+ Pass)
Circular flow - Answers -✔✔ A model that shows how households and firms circulate
resources, good, and incomes through the economy. This basic model is expanded to
include the government and the foreign sector.
Closed economy - Answers -✔✔ A model that assumes there is no foreign sector
(imports and exports)
Aggregation - Answers -✔✔ The process of summing the microeconomic activity of
households and firms into a more macroeconomic measure of economic activity
GDP - Answers -✔✔ The market value of the final goods and services produced within
a nation in a given period of time.
Final goods - Answers -✔✔ Goods that are ready for their final use by consumers and
firms, e.g., a Ferrari
Intermediate Goods - Answers -✔✔ Goods that require further modification before they
are ready for final use, e.g., steel used to make the Ferrari
Double counting - Answers -✔✔ The mistake of including the value of intermediate
stages of production in GDP on top of the value of the final good
Second-hand sales - Answers -✔✔ Final goods and services that are resold; final
goods can only be counted once so second-hand sales are not counted as part of GDP
Nonmarket transactions - Answers -✔✔ Household work or do-it-yourself jobs are
missed by GDP accounting
Aggregate Spending (GDP) - Answers -✔✔ The sum of all spending from four sectors
of the economy; GDP = C + I + G + (X-M)
Nominal GDP - Answers -✔✔ The value of current production at the current prices.
Valuing 2003 production with 2003 prices creates nominal GDP for 2003
Aggregate Income (AI) - Answers -✔✔ The sum of all income earned by suppliers of
resources in the economy. With some accounting adjustments, aggregate spending
equals aggregate income
, Real GDP - Answers -✔✔ The vale of current production, but using prices from a fixed
point in time. Valuing 2003 production at 2002 prices creates real GDP in 2003 and
allows us to compare it back to 2002
Base year - Answers -✔✔ The year that serves as a reference point for constructing a
price index and comparing real values over time
Price Index - Answers -✔✔ A measure of the average level of prices in a market basket
for a given year when compared to the prices in a reference year. You can interpret the
price index as the current price level as a percentage of the level in the base year.
Market Basket - Answers -✔✔ A collection of goods and services used to represent
what is consumed in the economy
GDP Price Deflator - Answers -✔✔ The price index that measures the average price
level of the goods and services that make up GDP
Real rate of interest - Answers -✔✔ The percentage increase in purchasing power that
a borrower pays a lender
Expected Inflation - Answers -✔✔ The inflation expected in a future time period. This
expected inflation is added to the real interest rate to compensate for lost purchasing
power
Nominal rate of interest - Answers -✔✔ The percentage increase in money that the
borrower pays the lender and is equal to the real rate plus the expected inflation
Consumer Price Index (CPI) - Answers -✔✔ The price index that measures the
average price level of items in the base year market basket. This is the main measure of
consumer inflation.
Inflation - Answers -✔✔ The percentage change in the CPI from one period to the next
Nominal Income - Answers -✔✔ Today's income measured in today's dollars. These
are dollars unadjusted by inflation
Real income - Answers -✔✔ Today's income measured in base year dollars. These
inflation-adjusted dollars can be compared from year to year to determine whether
purchasing power has increased or decreased.
Employed - Answers -✔✔ A person is employed if she has worked for pay at least one
hour per week
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