1. AP Macroeconomics
Final Exam Review

2. Economic growth
A sustained increase in
stimulate economic growth -

3. 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?

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

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

6. fiscal policy expenditures taxes most expansionary
taxes & government spending

7. 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

8. GDP
Counting gross domestic product - A good or service produced

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

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

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

12. 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

13. national debt
accumulation of past and current budget and

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

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