AP Macro Graphs

Flashcards for AP Macroeconomics Graphs

How is economic growth portrayed on a Production Possibilities Curve (PPC)?

PPC shifts outward, indicating economic growth

What type of monetary policy can lead to economic growth and shift the PPC outward?

Expansionary monetary policy leading to increased capital stock

What are the three scenarios for drawing a fully labeled AD/AS graph?

Full employment, negative output gap, positive output gap

What also shifts the LRAS Curve?

Factors that shift the PPC outward (e.g., technology, resources)

What are the components that shift the AD Curve?

Consumer spending, investment, government spending, net exports

What are the factors that shift the SRAS Curve?

Resource prices, actions, productivity, etc.

If the government takes no action with a negative output gap, what will happen to wages and resource costs in the long run?

Wages and resource costs will decrease, shifting the SRAS curve to the right

Factors such as changes in expected inflation

What shifts the SRPC left and right?

What causes a movement along the SRPC?

Changes in the actual inflation rate

What shifts the LRPC?

Changes in the natural rate of unemployment

What is an example of a scenario that would shift both the AD/AS graph and the Phillips Curve

A negative supply shock occurs

What are the three actions the Federal Reserve takes during Expansionary Monetary Policy?

Buy bonds, decrease discount rate, decrease reserve requirement

What are the three actions the Federal Reserve take during Contractionary Monetary Policy?

Sell bonds, increase discount rate, increase reserve requirement

What shifts the curve for Money Demanded?

Changes in income, price level, or expectations

What actions are taken during expansionary monetary policy in the Reserve Market Model (with ample reserves)?

Decreasing interest on reserves and lowering administered rates

What actions are taken during contractionary monetary policy in the Reserve Market Model (with ample reserves)?

Increasing interest on reserves and raising administered rates

What shifts the Demand of Loanable Funds?

Expected profitability of investments, business confidence

What shifts the Supply of Loanable Funds?

Changes in savings behavior, government policies

Explain crowding out in the Loanable Funds Market.

Increased government deficit spending increases demand which leads to higher interest rates, decreasing investment

What are the FOREX Shifters?

Changes in tastes, relative income, relative price level, relative interest rates

Which account of the Balance of Payments tracks net exports, net income on investments, and net transfers?

Current Account

Which account of the Balance of Payments tracks the purchase and sale of assets?

Capital and Financial Account