APMacro: Final AP Test Review


  1. GDP = C + I + G + Xn: The expenditure approach to measuring GDP
  2. GDP = R + I + P + SA + W: The income approach to measuring GDP
  3. Calculating nominal GDP: The quantity of various goods produced in a nation times their current prices, added together.
  4. GDP deflator: A price index used to adjust nominal GDP to arrive at real GDP. Called the ‘deflator’ because nominal GDP will usually over-state the value of a nation’s output if there has been inflation.
  5. Real GDP = (nominal GDP/ GDP deflator) x 100
  6. GDP Growth rate = [(current GDP – last year GDP)/last year GDP] x 100
  7. The inflation rate via the CPI = [(current CPI – last year CPI)/last year CPI] x 100
  8. Real interest rate = nominal interest rate – inflation rate.
  9. Unemployment Rate = (# of unemployed/# of labor force) x 100
  10. Money Multiplier = 1/required reserve ratio
  11. Quantity theory of money: MV = PY – a moneterist’s view which explains how changes in the money supply will affect the price level assuming the velocity of money and the level of output are fixed.
  12. MPC + MPS = 1. Households may consume or save with any change in their income.
  13. Spending Multiplier = 1/(1 – MPC) or 1/MPS
  14. Tax multiplier = -MPC/MPS. It tells you how much total spending will result from an initial change in the level of taxation. It is negative because when taxes decrease, spending increases, and vice versa. The tax multiplier will always be smaller than the spending multiplier.

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  1. Production Possibilities Curve
  2. Absolute Advantage
  3. Comparative Advantage
  4. Terms of Trade
  5. Circular Flow
  6. Business Cycle
  7. Supply and Demand
  8. Aggregate Demand-Aggregate Supply
  9. Investment Demand
  10. Money Market
  11. Loanable Funds
  12. Currency Market
  13. Phillips Curve
  14. Balance of Payments
  15. Bank Balance Sheet

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