5 Steps to a 5 AP Microeconomics and Macroeconomics

337 Pages·2006·9.91 MB·English

by  Eric Dodge

McGRAW-HILL
5 Steps to a 5
AP Microeconomics/
Macroeconomics
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McGRAW-HILL
5 Steps to a 5
AP Microeconomics/
Macroeconomics
Eric R. Dodge
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Contents
Acknowledgments / ix
Preface / xi
PART I HOW TO USE THIS BOOK / 1
The Basics / 3
Organization of the Book / 3
Introduction to the Five-Step Program / 3
Three Approaches to Preparing for the AP Economics Exams / 4
Calendars for Preparing for Each of the Plans / 6
Introduction to the Graphics Used in This Book / 9
PART II WHAT YOU NEED TO KNOW ABOUT
THE AP ECONOMICS EXAMS / 11
Background Information / 13
Some Frequently Asked Questions About the AP Economics Exams / 13
Why take the AP Economics Exam? / 13
Who writes the AP Economics Exam? / 13
What is going to appear on the exam? / 14
Who grades my AP Economics Exam? / 17
Will my exam remain anonymous? / 18
What about that permission box on the back? / 18
How is my multiple-choice exam scored? / 18
How is my free-response exam scored? / 18
So how is my final grade determined and what does it mean? / 18
How do I register and how much does it cost? / 19
What if my school only offered AP Macroeconomics and not AP Microeconomics,
or vice versa? / 20
What should I bring to the exam? / 20
What should I NOT bring to the exam? / 20
Tips for Taking the AP Economics Exams / 21
Section I: Multiple-Choice Questions / 21
Section II: Free-Response Questions / 21
Getting Started: The Diagnostic Exams / 23
Diagnostic Exams: Answer Sheet / 23
Diagnostic Exam: AP Microeconomics / 24
Diagnostic Exam: AP Macroeconomics / 28
Microeconomics Answers and Explanations, Section I / 31
Macroeconomics Answers and Explanations, Section I / 33
Scoring and Interpretation / 35
PART III COMPREHENSIVE REVIEW / 37
Chapter 1 Fundamentals of Economic Analysis / 39
Introduction / 39
1.1 Scarce Resources / 39
vv
vi • Contents
1.2 Production Possibilities / 42
1.3 Functions of Economic Systems / 48
Review Questions / 49
Answers and Explanations / 50
Rapid Review / 50
Chapter 2 Demand, Supply, Market Equilibrium,
and Welfare Analysis / 52
Introduction / 52
2.1 Demand / 52
2.2 Supply / 57
2.3 Market Equilibrium / 61
2.4 Welfare Analysis / 66
Review Questions / 68
Answers and Explanations / 68
Rapid Review / 69
Chapter 3 Elasticity, Microeconomic Policy,
and Consumer Theory / 71
Introduction / 71
3.1 Elasticity / 71
3.2 Microeconomic Policy and Applications of Elasticity / 80
3.3 Consumer Choice / 85
Review Questions / 90
Answers and Explanations / 91
Rapid Review / 92
Chapter 4 The Firm, Profit, and the Costs of Production / 94
Introduction / 94
4.1 Firms, Opportunity Costs, and Profits / 94
4.2 Production and Cost / 96
Review Questions / 105
Answers and Explanations / 105
Rapid Review / 106
Chapter 5 Market Structures, Perfect Competition,
Monopoly, and Things Between / 108
Introduction / 108
5.1 Perfect Competition / 108
5.2 Monopoly / 118
5.3 Monopolistic Competition / 123
5.4 Oligopoly / 125
Review Questions / 127
Answers and Explanations / 128
Rapid Review / 129
Chapter 6 Factor Markets / 130
Introduction / 130
6.1 Factor Demand / 130
6.2 Least-Cost Hiring of Multiple Inputs / 135
6.3 Factor Supply and Market Equilibrium / 136
6.4 Imperfect Competition in Product and Factor Markets / 137
Contents • vii
Review Questions / 139
Answers and Explanations / 140
Rapid Review / 141
Chapter 7 Public Goods, Externalities,
and the Role of Government / 142
Introduction / 142
7.1 Public Goods and Spillover Benefits / 142
7.2 Pollution and Spillover Costs / 145
7.3 Income Distribution and Tax Structures / 147
Review Questions / 150
Answers and Explanations / 151
Rapid Review / 152
Chapter 8 Macroeconomic Measures of Performance / 153
Introduction / 153
8.1 The Circular Flow Model / 154
8.2 Accounting for Output and Income / 155
8.3 Inflation and the Consumer Price Index / 161
8.4 Unemployment / 165
Review Questions / 167
Answers and Explanations / 167
Rapid Review / 168
Chapter 9 Consumption, Saving, Investment,
and the Multiplier / 170
Introduction / 170
9.1 Consumption and Saving / 170
9.2 Investment / 174
9.3 The Multiplier Effect / 177
Review Questions / 180
Answers and Explanations / 181
Rapid Review / 181
Chapter 10 Aggregate Demand and Aggregate Supply / 183
Introduction / 183
10.1 Aggregate Demand (AD) / 183
10.2 Aggregate Supply (AS) / 186
10.3 Macroeconomic Equilibrium / 188
10.4 The Trade-off Between Inflation and Unemployment / 194
Review Questions / 197
Answers and Explanations / 198
Rapid Review / 198
Chapter 11 Fiscal Policy, Economic Growth,
and Productivity / 200
Introduction / 200
11.1 Expansionary and Contractionary Fiscal Policy / 200
11.2 Difficulties of Fiscal Policy / 203
11.3 Economic Growth and Productivity / 206
Review Questions / 209
Answers and Explanations / 210
Rapid Review / 211
viii • Contents
Chapter 12 Money, Banking, and Monetary Policy / 212
Introduction / 212
12.1 Money and Financial Assets / 212
12.2 Fractional Reserve Banking and Money Creation / 218
12.3 Monetary Policy / 220
Review Questions / 225
Answers and Explanations / 226
Rapid Review / 226
Chapter 13 International Trade / 228
Introduction / 228
13.1 Comparative Advantage and Gains from Trade / 228
13.2 Balance of Payments / 232
13.3 Foreign Exchange Rates / 234
13.4 Trade Barriers / 237
Review Questions / 239
Answers and Explanations / 240
Rapid Review / 240
PART IV PRACTICE MAKES PERFECT! / 241
AP Microeconomics Practice Exam 1 / 243
AP Macroeconomics Practice Exam 1 / 260
AP Microeconomics Practice Exam 2 / 277
AP Macroeconomics Practice Exam 2 / 293
APPENDIX / 309
Bibliography / 311
Web sites / 312
Glossary / 313
Important Formulas and Conditions / 320
About the Author / 323