Study AP Macroeconomics with flashcards covering GDP, unemployment, inflation, money markets, and the graphs required for the FRQ section.
Must-Know AP Macro Terms and Graphs
- AD/AS Model: Aggregate Demand/Aggregate Supply model showing the price level and real GDP. AD shifts: C, I, G, X-M changes. SRAS shifts: input prices, productivity, expectations. LRAS: potential output, shifts with capital, labor, technology.
- Money Market Graph: Money supply (vertical, controlled by Fed) vs. money demand (downward sloping). Intersection determines nominal interest rate. Fed tools: OMO, discount rate, reserve requirement.
- Loanable Funds Market: Determines real interest rate. Supply (savings) meets demand (borrowing). Crowding out: government borrowing raises interest rates, reducing private investment.
- Fiscal Policy: Government spending and taxation to manage the economy. Expansionary: increase G or cut T (shifts AD right). Contractionary: cut G or raise T (shifts AD left). Multiplier effect amplifies impact.
- Phillips Curve: Short-run tradeoff between inflation and unemployment. SRPC shifts with supply shocks or changes in inflation expectations. LRPC is vertical at natural rate of unemployment.
- Balance of Payments: Current account (trade in goods/services) + Capital account + Financial account = 0. Current account deficit → financial account surplus (capital inflows).
- Crowding Out: When government borrowing increases interest rates, reducing private investment. Full crowding out: increase in G exactly offset by decrease in I. Partial: some private investment remains.
AP Macro Practice Questions · AP Macro Study Guide · How to Get a 5 on AP Macro
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