Click image to open full size
Social Studies
Grade 11-12
AP Macroeconomics Course Reference Cheat Sheet
A printable reference covering GDP, inflation, unemployment, fiscal policy, monetary policy, aggregate demand, aggregate supply, and exchange rates for grades 11-12.
Related Tools
Related Labs
Related Worksheets
This AP Macroeconomics course reference covers the main models, formulas, and policy tools students need for review and exam practice. It helps organize big ideas such as national income, price levels, unemployment, banking, and international trade. Students can use it to connect formulas with graphs and to check how economic changes shift curves.
Key Facts
- Nominal GDP measures output using current prices, while real GDP measures output using base-year prices.
- The GDP deflator is calculated as GDP deflator = nominal GDP / real GDP x 100.
- The unemployment rate is calculated as unemployment rate = unemployed / labor force x 100.
- The labor force participation rate is calculated as labor force participation rate = labor force / adult population x 100.
- The inflation rate is calculated as inflation rate = (CPI in current year - CPI in previous year) / CPI in previous year x 100.
- Aggregate demand is AD = C + I + G + Xn, where Xn means exports minus imports.
- The simple spending multiplier is multiplier = 1 / MPC, and the tax multiplier is tax multiplier = -MPC / MPS.
- The money multiplier is money multiplier = 1 / reserve requirement when banks hold no excess reserves.
Vocabulary
- Gross Domestic Product
- Gross Domestic Product is the market value of all final goods and services produced within a country in a specific period.
- Aggregate Demand
- Aggregate demand is the total planned spending on domestic output at each possible price level.
- Aggregate Supply
- Aggregate supply is the total amount of goods and services producers are willing and able to supply at each price level.
- Fiscal Policy
- Fiscal policy is the use of government spending and taxation to influence aggregate demand, output, and employment.
- Monetary Policy
- Monetary policy is the central bank's use of money supply and interest rate tools to influence inflation, output, and employment.
- Exchange Rate
- An exchange rate is the price of one currency in terms of another currency.
Common Mistakes to Avoid
- Confusing nominal GDP with real GDP is wrong because nominal GDP changes with both prices and output, while real GDP removes the effect of price changes.
- Counting discouraged workers as unemployed is wrong because discouraged workers are not actively looking for work and are not in the labor force.
- Shifting aggregate demand when only the price level changes is wrong because a price level change causes movement along AD, not a shift of the AD curve.
- Mixing up expansionary and contractionary policy is wrong because expansionary policy increases AD, while contractionary policy decreases AD to reduce inflation pressure.
- Forgetting that higher interest rates reduce investment and interest-sensitive consumption is wrong because borrowing becomes more expensive, which lowers aggregate demand.
Practice Questions
- 1 If nominal GDP is 2400 billion dollars and real GDP is 2000 billion dollars, what is the GDP deflator?
- 2 A country has 8 million unemployed people and a labor force of 160 million people. What is the unemployment rate?
- 3 If MPC = 0.8 and government spending increases by 50 billion dollars, what is the maximum change in real GDP using the simple spending multiplier?
- 4 Explain why an increase in consumer confidence shifts aggregate demand rather than causing movement along the aggregate demand curve.