Macro AP Unit 1

Question 1

Explain how to show a recession, full employment,and growth on the production possibilities curve.

Answer 1

A recession is a point inside the PPC, full employmentis a point on the PPC, and economic growth is whenthe entirePPC shifts outward to the right.

Question 2

Explain the difference between an output comparativeadvantage question and an input question

Answer 2

An output question is when different amounts of goodsare made with equal amounts of resources. An inputquestion iswhen different amounts of resources are used to makethe same amount of goods.

Question 3

Explain how to determine if a country has a comparativeadvantage.

Answer 3

To determine if a country has acomparative advantage, compare how much each countrygives up when they produce something. The country that has the lower opportunity cost has the comparative advantage.

Question 4

Explain how to determine the terms of trade when two countries specialize

Answer 4

Countries can benefitfrom trade if they can get goods at a lower opportunitycost then if they produce it on their own. If theamount given upwhen trading is lower than the opportunity cost thenthat country benefits from trade.

Question 5

Explain why either price or quantity are indeterminatewhen both demand and supply change

Answer 5

A double shift causes a definitive change in eitherequilibrium price OR quantity. The one that doesn’tdefinitivelychange is indeterminate because it depends on theseverity (size) of the shift.