Fall Semester Final Review

Name ______Period ______Date ______

AP Macroeconomics 2017-2018

Fall Semester Final Review

1. Sketch a production possibilities curve for two goods, cars and tanks.

a)Explain why the curve is concave down (“bowed out”).

b)Plot and label three points representing efficient output possibilities where the economy’s scarce resources are fully utilized.

c)Plot and label a point representing an inefficient output possibility.

d)Plot and label a point representing an output possibility that is not currently possible.

e)List the factors that would enable the curve to shift out.

1. Two countries produce only two goods – cars and trucks. The maximum output for each country is shown in the table below.

Maximum Outputs / Country A / Country B
Cars / 30 million / 35 million
Trucks / 6 million / 21 million

a)On the same axes, sketch production possibilities curves for both countries.

b)Which country has the absolute advantage in producing cars?

c)Which country has the absolute advantage in producing trucks?

d)Would both countries benefit from trade? Explain why.

e)What is the maximum number of cars and trucks that can be produced assuming trade is beneficial.

f)Plot a point on the graph that shows each country achieving higher levels of output for both cars and trucks.

1. Sketch a correctly labeled graph showing the market for computers in equilibrium.

a)What explains the slope of the demand curve?

b)What explains the slope of the supply curve?

c)Indicate a price that would lead to a shortage of computers. Indicate the size of the shortage on your graph.

d)Indicate a price that would lead to a surplus of computers. Indicate the size of the surplus on your graph.

e)State the factors that would cause a shift in the supply curve. For each factor, state what would cause the quantity supplied to increase or decrease. For each, state which direction the curve shifts.

f)State the factors that would cause a shift in the demand curve. For each factor, state what would cause the quantity demanded to increase or decrease. For each, state which direction the curve shifts.

g)The price of memory chips increases. Sketch a correctly labeled graph that shows the market for computers in equilibrium and the impact of the memory chip price change. State the impact on price and quantity.

h)Improvements in technology used to produce computers is introduced. At the same time, the real income of consumers increases. Sketch a correctly labeled graph that shows the market for computers in equilibrium and the impact of these changes. State the impact on price and quantity.

1. Food purchases in SuperSize Land are shown in the table below.

Year 1 / Year 2
Item / Quantity / Price / Quantity / Price
Pizza / 50 / $10 / 60 / $11
Cheeseburgers / 50 / 8 / 55 / 10
Tacos / 50 / 2 / 80 / 3

a)Assuming these are the only goods and services available in SuperSize Land, calculate both real and nominal GDP for both years.

b)Calculate the CPI for both years.

c)Calculate the inflation rate.

d)The average worker in SuperSize Land earned a 12% raise in Year 2. Was this worker’s economic situation better, worse, or the same in Year 2 versus Year 1? Explain.

1. Population data for an economy is given below.

In Millions
Total Population / 325
Population Under 16 / 65
Retirees / 80
Disabled & Unable to Work / 20
Marginally Attached Workers / 50
Actively Seeking Jobs / 10
Employed / 100

Calculate each of the following. Show how you calculate each.

a)Size of the labor force

b)Labor force participation rate

c)Unemployment rate

d)Define natural unemployment and actual unemployment

1. Consider an economy operating at full employment.

a)Draw a correctly labeled aggregate supply and aggregate demand graph for the economy.

b)List the five factors that cause shifts in the aggregate demand curve and how each factor affects the curve.

c)List the five factors that cause shifts in the aggregate demand curve and how each factor affects the curve.

d)List the four factors that cause shifts in the aggregate supply curve and how each factor affects the curve.

e)Create two different scenarios that depict a change in the aggregate demand curve, sketch the changes on an AD/AS graph, and describe how the economy returns to long run equilibrium, including the overall effect on price level and output.

f)Create two different scenarios that depict a change in the aggregate supply curve, sketch the changes on an AD/AS graph, and describe how the economy returns to long run equilibrium, including the overall effect on price level and output.