5 Steps to a 5 - AP Economics _2008-2009_

381 Pages·2009·3.44 MB·English

5
FIVE STEPS TO A
AP Microeconomics/Macroeconomics
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Writing the AP English Essay
5
FIVE STEPS TO A
AP Microeconomics/
Macroeconomics
2008-2009
Eric R. Dodge
M G -H
C RAW ILL
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DOI: 10.1036/0071497951
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ABOUT THE AUTHOR
Eric R. Dodge was born in Portland, Oregon and attended high school in Tigard, Oregon.
He received a bachelor’s degree in Business Administration from the University of Puget
Sound in Tacoma, Washington before attending the University of Oregon for his master’s
and doctoral degrees in Economics. While at the University of Oregon he received two
graduate student awards for teaching and became a die-hard fan of the Ducks. Since 1995
he has been teaching economics at Hanover College in Hanover, Indiana, the oldest private
college in the state. The author teaches principles of microeconomics and macroecon-
omics, intermediate microeconomic theory, labor economics, environmental economics,
industrial organization, statistics, and econometrics. Since 2000 he has served as a faculty
consultant for the Educational Testing Service reading AP free-response exams. He lives in
Madison, Indiana with his wife, Molly and son Eli.
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CONTENTS
Preface, ix
Acknowledgments, xi
Introduction: The Five-Step Program, xiii
STEP 1 Set Up Your Study Program, 1
1 What You Need to Know About the AP Economics Exams, 3
2 How to Plan Your Time, 12
STEP 2 Determine Your Test Readiness, 17
3 Take Diagnostic Exams, 19
Diagnostic Exam: AP Microeconomics, 23
Diagnostic Exam: AP Macroeconomics, 28
STEP 3 Develop Strategies for Success, 39
4 How to Approach Each Question Type, 41
Multiple-Choice Questions, 41
Free-Response Questions, 44
STEP 4 Review the Knowledge You Need to Score High, 47
5 Fundamentals of Economic Analysis, 49
Scarce Resources, 50
Production Possibilities, 53
Functions of Economic Systems, 59
6 Demand, Supply, Market Equilibrium, and Welfare Analysis, 63
Demand, 63
Supply, 69
Market Equilibrium, 72
Welfare Analysis, 77
7 Elasticity, Microeconomic Policy, and Consumer Theory, 82
Elasticity, 83
Microeconomic Policy and Applications of Elasticity, 91
Consumer Choice, 98
8 The Firm, Profit, and the Costs of Production, 107
Firms, Opportunity Costs, and Profits, 108
Production and Cost, 109
9 Market Structures, Perfect Competition, Monopoly,
and Things Between, 121
Perfect Competition, 122
Monopoly, 132
Monopolistic Competition, 137
Oligopoly, 139
viii ❯ Contents
10 Factor Markets, 145
Factor Demand, 146
Least-Cost Hiring of Multiple Inputs, 150
Factor Supply and Market Equilibrium, 152
Imperfect Competition in Product and Factor Markets, 153
11 Public Goods, Externalities, and the Role of Government, 157
Public Goods and Spillover Benefits, 158
Pollution and Spillover Costs, 160
Income Distribution and Tax Structures, 162
12 Macroeconomic Measures of Performance, 169
The Circular Flow Model, 170
Accounting for Output and Income, 171
Inflation and the Consumer Price Index, 177
Unemployment, 181
13 Consumption, Saving, Investment, and the Multiplier, 187
Consumption and Saving, 188
Investment, 191
The Multiplier Effect, 194
14 Aggregate Demand and Aggregate Supply, 201
Aggregate Demand, 201
Aggregate Supply, 204
Macroeconomic Equilibrium, 207
The Trade-off Between Inflation and Unemployment, 212
15 Fiscal Policy, Economic Growth, and Productivity, 219
Expansionary and Contractionary Fiscal Policy, 219
Difficulties of Fiscal Policy, 223
Economic Growth and Productivity, 225
16 Money, Banking, and Monetary Policy, 232
Money and Financial Assets, 232
Fractional Reserve Banking and Money Creation, 239
Monetary Policy, 241
17 International Trade, 249
Comparative Advantage and Gains from Trade, 249
Balance of Payments, 253
Foreign Exchange Rates, 255
Trade Barriers, 258
STEP 5 Build Your Test-Taking Confidence, 263
AP Microeconomics Practice Exam 1, 267
AP Macroeconomics Practice Exam 1, 287
AP Microeconomics Practice Exam 2, 309
AP Macroeconomics Practice Exam 2, 329
Appendixes, 347
Bibliography, 348
Web Sites, 349
Glossary, 350
Important Formulas and Conditions, 358