Macroeconomics/Microeconomics : 2007 Edition Book

About the Authors     ix
Kaplan Panel of AP Experts     xi
The Basics
Inside the AP Economics Exams     3
Overview of the Exam Structure     5
How the Exams Are Scored     7
Registration and Fees     8
Additional Resources     8
Strategies for Success: It's Not Always How Much You Know     15
Strategies for the AP Economics Exams     16
Multiple-Choice Questions     17
Ten-Minute Reading Period     22
Free-Response Questions     22
Stress Management     25
Countdown to the Tests     27
Diagnostic Tests
AP Macroeconomics Diagnostic Test     33
How to Compute Your Score     34
Answers and Explanations     44
AP Microeconomics Diagnostic Test     51
How to Compute Your Score     52
Answers and Explanations     60
AP Macroeconomics Review
Basic Economic Concepts     67
Scarcity, Choice, and Opportunity Costs     67
Production Possibilities Curve     70
Comparative Advantage, Specialization, and Exchange     72
Demand, Supply, and Market Equilibrium     73
Review Questions     78
Answers and Explanations     79
Measurement of Economic Performance     81
National Income Accounts     81
GDP     82
Business Cycles, Unemployment, and Growth     83
Inflation Measurement     84
Unemployment     84
Review Questions     88
Answers and Explanations     91
National Income and Price Determination     93
Aggregate Demand (AD)     93
Aggregate Supply (AS)     96
Macroeconomic Equilibrium     97
Fiscal Policy and the Multipliers     99
Review Questions     102
Answers and Explanations     105
Financial Sector     107
Money Banking, and Financial Markets     107
The Central Bank and Control of the Money Supply     110
Review Questions     115
Answers and Explanations     118
Inflation, Unemployment, and Stabilization Policies     121
Fiscal and Monetary Policies     121
Inflation and Unemployment     126
Review Questions     128
Answers and Explanations     132
Economic Growth and Productivity     137
Economic Growth      137
Review Questions     140
Answers and Explanations     142
Open Economy: International Trade and Finance     145
Balance of Payment Accounts     145
Foreign Exchange Market     147
Trade Restrictions     148
Review Questions     149
Answers and Explanations     152
AP Microeconomics Review
Basic Economic Concepts     157
Scarcity, Choice, and Opportunity Cost     157
Production Possibilities Curve     157
Comparative Advantage, Specialization, and Trade     159
Economic Systems     160
Property Rights and Incentives     161
Marginal Analysis     161
Review Questions     162
Answers and Explanations     164
The Nature and Structure of Product Markets     165
Supply and Demand     165
Theory of Consumer Choice     180
Firm Behavior and Market Structure     184
Review Questions     194
Answers and Explanations     202
Factor Markets     209
Derived Factor Demand     209
Marginal Revenue Product     209
Labor Market and Firms' Hiring of Labor      211
Review Questions     215
Answers and Explanations     218
Market Failure and the Role of Government     223
Externalities     223
Public Goods     230
Public Policy to Promote Competition     232
Income Distribution     232
Review Questions     235
Answers and Explanations     239
Practice Tests
How to Take the Practice Tests     244
How to Compute Your Score     245
AP Macroeconomics Practice Test     249
Answers and Explanations     268
AP Microeconomics Practice Test     281
Answers and Explanations     298
AP Economics Glossary     309