Every Graph to Know for AP Macroeconomics

Production Possibilities Curve (PPC)

A graphical representation showing the maximum possible output combinations of two goods that can be produced with available resources and technology.

Inefficient Use of Resources

Refers to a point inside the PPC where resources are not fully utilized, indicating inefficiency but still possible production.

Scarcity

The limited availability of resources which restricts the level of production.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, illustrated by the shape of the PPC.

Non-Price Determinants of Demand

Factors other than price that cause a shift in the demand curve, including consumer tastes, market size, incomes, prices of related goods, and expectations.

Law of Demand

A principle stating that all else being equal, an increase in the price of a good will decrease the quantity demanded, and vice versa.

Short-Run vs Long-Run Phillips Curve

The Short-Run Phillips Curve shows an inverse relationship between inflation and unemployment, while the Long-Run Phillips Curve is vertical, indicating no trade-off at the natural rate of unemployment.

Aggregate Demand (AD)

The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.

Equilibrium Price

The price at which the quantity supplied equals the quantity demanded in a market.

Loanable Funds Market

A market that illustrates the interaction between the supply of and demand for funds, determining the real interest rate.

Demand-Pull Inflation

When aggregate demand increases, causing both the price level and output to rise.

Fiscal Policy

Government policy related to spending and taxation aimed at influencing economic conditions.

Supply Curve Shift

A movement of the entire supply curve due to factors such as changes in production costs or technology.

Real GDP

Gross Domestic Product adjusted for inflation, representing the total output of goods and services in an economy.

Double Shift in Supply and Demand

When both supply and demand curves shift simultaneously, affecting equilibrium price and quantity in unpredictable ways.

Foreign Exchange Market

The market where currencies are traded, with prices determined by supply and demand for different currencies.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

Business Cycle

The fluctuations in economic activity over time, characterized by periods of expansion and contraction.

Consumer Confidence

An economic indicator that measures how optimistic consumers are about the overall state of the economy and their personal financial situation.

Crowding Out Effect

When heightened government borrowing leads to increased interest rates, making it more expensive for private sector investments.

Substitutes

Products or services that can be used in place of one another; an increase in the price of one leads to increased demand for the other.

Complements

Products that are typically consumed together, where an increase in the price of one leads to a decrease in demand for the other.

Natural Rate of Unemployment (NRU)

The level of unemployment consistent with a stable rate of inflation, including frictional and structural unemployment.