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AP Macroeconomics — Concepts and Models flashcards

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Units 1–3: scarcity and the PPC, GDP, unemployment, price indices and inflation, the business cycle, aggregate demand and supply, multipliers, output gaps and fiscal policy, with graph-shift scenarios in the style of the AP exam.

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Learn deck · part of AP Macroeconomics · written against: College Board AP Macroeconomics Course and Exam Description (six units). Updated 2026-10-10.

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  1. A student turns down an 80-dollar shift at work to attend a free concert. What is the opportunity cost of the concert?
    The 80 dollars of forgone wages (plus anything else that evening would have offered).

    Opportunity cost is the value of the next-best alternative given up, so a free ticket is not a free evening.
    Basic Economic Concepts
  2. An economy is producing at a point inside its production possibilities curve. What macroeconomic condition does that usually signal?
    Unemployed or underused resources, as in a recession. The economy could produce more of both goods without giving anything up, so the point is inefficient.
    Basic Economic Concepts
  3. Two countries start with identical PPCs, but Country A devotes more of today's output to capital goods. How will their PPCs compare in twenty years?
    Country A's PPC will have shifted farther outward: more machinery and infrastructure raise future productive capacity. The price is fewer consumer goods today.
    Basic Economic Concepts
  4. Which of these shifts an economy's PPC outward: a recession ending, a rise in the labor force, or a switch from making cars to making trucks?
    Only the larger labor force shifts the PPC outward.

    A recession ending moves the economy from inside the curve back toward it, and reallocating production moves the economy along the curve.
    Basic Economic Concepts
  5. What exactly does GDP measure, and why does it count only final goods and services?
    GDP is the market value of all final goods and services produced within a country's borders in a given period. Counting intermediate goods as well would double count them, since their value is already in the final price.
    Economic Indicators and the Business Cycle › GDP
  6. Which of these is counted in this year's U.S. GDP: a used car bought from a neighbor, a Social Security payment, or a newly built house?
    Only the newly built house, which counts as investment. The used car was counted when it was first produced, and Social Security is a transfer payment with no new production.
    Economic Indicators and the Business Cycle › GDP
  7. A Japanese-owned auto plant in Ohio builds a car. Does the car count in U.S. GDP or Japanese GDP?
    U.S. GDP, because GDP is defined by where production happens.

    The income earned by the Japanese owners counts toward Japan's GNP, which is defined by ownership.

    GNP is not in the AP Macroeconomics 2026 outline; background only.
    Economic Indicators and the Business Cycle › GDP
  8. What three effects explain why the aggregate demand curve slopes downward?
    The wealth (real-balances) effect, the interest-rate effect and the exchange-rate (foreign-purchases) effect.

    Each one makes real output demanded rise when the price level falls.
    National Income and Price Determination › Aggregate Demand and Multipliers
  9. A higher price level raises the demand for money, pushing up interest rates and cutting investment spending. Which reason for AD's slope is this?
    The interest-rate effect. It explains a movement along AD, not a shift.
    National Income and Price Determination › Aggregate Demand and Multipliers
  10. Consumers become pessimistic about future job prospects. Which curve shifts, which way, and what happens to the price level and real output in the short run?
    AD shifts left as consumption falls. The price level and real GDP both fall, and unemployment rises.
    National Income and Price Determination › Aggregate Demand and Multipliers

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About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

  • Topic outline follows the College Board AP Macroeconomics Course and Exam Description (effective Fall 2026), Units 1–3 (used as an outline only; no text copied).
  • OpenStax Principles of Economics 3e, consulted as a reference; no text copied.
  • Checked against Mankiw, Principles of Macroeconomics (reference only; no text copied).

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