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AP Economics
Mr. Bernstein
Macro Graphs Review
April 2015
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The Production Possibilities Curve
AP EconomicsMr. Bernstein
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Economic Growth• Concave due to “Law of increasing opportunity costs”
AP EconomicsMr. Bernstein
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Circular Flow Diagram
AP EconomicsMr. Bernstein
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Expanded Circular Flow Diagram
AP EconomicsMr. Bernstein
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AP EconomicsMr. Bernstein
Money Market• Assumes fixed MS; Y axis is Nominal Rates
• Know shifters of MD
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AP EconomicsMr. Bernstein
Loanable Funds Market• Supply is upward sloping; Y axis is Real Rates
• Know shifters of S, D
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AP EconomicsMr. Bernstein
Contractionary Monetary Policy and Rates• Fed sells securities, rates rise
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AP EconomicsMr. Bernstein
Contractionary Monetary Policy & the Economy• Increases in rates leads to decrease in Investment, AD
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AP EconomicsMr. Bernstein
Long-Run Macroeconomic Equilibrium• Returns to LRAS via shift in SRAS
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AP EconomicsMr. Bernstein
Short-Run and Long-Run Effects of Increase in MS• Short-run shift in AD offset by shift in SRAS• LRAS does not shift; only P increases
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AP EconomicsMr. Bernstein
Short-Run Phillips Curve• Tradeoff between inflation and unemployment
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AP EconomicsMr. Bernstein
Long-Run Phillips Curve• LRPC = Natural Rate of Unemployment
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AP EconomicsMr. Bernstein
Exchange Rates• Labeling: think “bottom/bottom”