APMacro: AP Test Review

  1. GDP = C + I + G + X: 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. MPC + MPS = 1. Households may consume or save with any change in their income.
  11. Spending Multiplier = 1/(1 – MPC) or 1/MPS
  12. 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.
  13. Money Multiplier = 1/required reserve ratio
  14. Bank Balance Sheet – Liabilities and Assets must balance
  15. Balance of Payments – Current Account, Capital Account, and Reserve Account = zero 

  • Production Possibilities Frontier Graph
  • Supply and Demand Graph
  • Circular Flow
  • Business Cycle
  • Aggregate Demand and Aggregate Supply (AD-AS) Graph
    • AD-AS full employment
    • AD-AS recession
    • AD-AS demand pull inflation
  • Money Market Graph
  • Loanable Funds Graph
  • Investment Demand Graph
  • Phillips Curve Graph
  • Foreign Exchange Market Graph



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