Questions and Answers
What does PPC stand for in economics?
What is the purpose of a Demand and Supply Graph?
What does the Business Cycle represent?
What is depicted in a Short Run AD/AS Graph?
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What does the Money Market Graph illustrate?
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What does the Loanable Funds Graph depict?
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What is represented in an Investment Demand Graph?
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What is shown in a Foreign Exchange Graph?
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What does the Phillips Curve illustrate?
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Study Notes
PPC Graph
- Represents the production possibilities frontier, illustrating the maximum attainable output combinations of two goods or services.
- Shows opportunity cost and efficiency; points on the curve indicate efficient production, while points inside represent inefficiency.
- Outward shifts indicate economic growth, often resulting from increased resources or technological advancements.
Demand and Supply Graph
- Visualizes the relationship between the price of a good and the quantity demanded or supplied.
- The intersection of the demand and supply curves establishes the market equilibrium price and quantity.
- Changes in factors like consumer preferences or production costs shift the curves, affecting equilibrium.
Business Cycle
- Describes the fluctuations in economic activity over time, consisting of four phases: expansion, peak, contraction (recession), and trough.
- Expansion is characterized by rising GDP and employment, while contraction highlights declining economic activity.
- Business cycles are influenced by factors such as consumer confidence, investment levels, and government policies.
Short Run AD/AS Graph
- Illustrates aggregate demand (AD) and short-run aggregate supply (AS), demonstrating the impact of changes in economic conditions on price levels and output.
- In the short run, prices are sticky; AS may not respond immediately to changes in AD.
- Shifts in AD can lead to demand-pull inflation or recessionary gaps, while shifts in AS reflect cost-push inflation.
Money Market Graph
- Depicts the supply and demand for money, showing how interest rates are determined.
- The vertical supply curve represents the fixed money supply, while the downward-sloping demand curve reflects the relationship between interest rates and the quantity of money demanded.
- Equilibrium occurs where money supply meets money demand, influencing overall economic activity.
Loanable Funds Graph
- Represents the market for loanable funds, where savers supply funds to borrowers at an interest rate.
- The supply curve slopes upward, indicating that higher interest rates attract more savings, while demand slopes downward as borrowers seek funds.
- Equilibrium interest rate influences investment and savings rates in the economy.
Investment Demand Graph
- Illustrates the relationship between the interest rate and the quantity of investment demanded.
- Typically, higher interest rates decrease investment demand, while lower rates encourage borrowing and investment activities.
- Factors influencing investment include business expectations, technology, and government policies.
Foreign Exchange Graph
- Shows the supply and demand for foreign currency, indicating how exchange rates are determined.
- A higher demand for a country's currency strengthens it, affecting international trade and capital flows.
- Shifts can result from changes in interest rates, inflation, and political stability, influencing export and import levels.
Phillips Curve
- Demonstrates the inverse relationship between unemployment and inflation in the short run.
- Low unemployment tends to be associated with higher inflation rates, while higher unemployment correlates with lower inflation.
- The long-run Phillips Curve suggests no trade-off between inflation and unemployment, implying a natural rate of unemployment.
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Description
Test your knowledge of essential AP Macroeconomic graphs with these flashcards. Each card includes critical terms like PPC Graph, Demand and Supply Graph, and more. Perfect for students preparing for the AP exam.
