AP Macroeconomics Final Exam Review

Economic growth A sustained increase in stimulate economic growth -

exchange rate The price of e.g. If a Japanese firm buys cars from the United States, there would be an increase in which of the following in the foreign exchange market ( for US dollars and of yen) Impact of high inflation in a given country?

Trade Absolute v Comparative advantage with PPC implies that two countries should benefit from trade (unless both have equal opportunity costs in every good)

Nominal v Real Real interest rate = – inflation Nominal interest rate = Real + Nominal rate of increase v real (with % change calculation)

fiscal policy expenditures taxes most expansionary taxes & government spending

Monetary policy Contraction to fight inflation (higher interest rate) Expansion to fight recession (lower interest rate) Increasing the reserve requirement – Fed reduces the ability of the banking system to create money

GDP Counting gross domestic product - A good or service produced

GDP = AD GDP/AD = C , I , G spending and net (Xn)

impact of a decrease/increase in foreign income on the aggregate demand in the United States

short-run Phillips curve decrease in unemployment = in inflation Increase in unemployment = in inflation

AS Input costs (e.g. labor wages) rise, supply shifts (up) decrease in the price of inputs = in the short-run AS and a in the price level

national debt accumulation of past and current budget and

Purchasing power A decrease in the purchasing power of the currency most undermines the ability of a nation’s currency to

Types of unemployment Cyclical unemployment Frictional unemployment e.g. who is looking for her first job Structural unemployment Problems measuring unemployment -