Advanced Placement (AP) Macroeconomics (also known as AP Macro and AP Macroecon) is an

Advanced Placement Advanced Placement (AP) is a program in the United States and Canada created by the College Board which offers college-level curricula and examinations to high school students. American colleges and universities may grant placement and course ...

macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...

course for high school students that culminates in an exam offered by the

College Board The College Board is an American nonprofit organization that was formed in December 1899 as the College Entrance Examination Board (CEEB) to expand access to higher education. While the College Board is not an association of colleges, it runs a ...

. Study begins with fundamental economic concepts such as scarcity,

opportunity costs In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effective it means if you chose one activity (for example ...

, production possibilities, specialization,

comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

, demand, supply, and

price determination Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...

. Major topics include measurement of economic performance, national income and price determination, fiscal and

monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...

, and international economics and growth. AP Macroeconomics is frequently taught in conjunction with (and, in some cases, in the same year as)

AP Microeconomics Advanced Placement (AP) Microeconomics (also known as AP Micro) is a course offered by the College Board as part of the Advanced Placement Program for high school students interested in college-level coursework in microeconomics and/or gaining ad ...

as part of a comprehensive

AP Economics Advanced Placement (AP) Economics (also known as AP Econ) refers to two College Board Advanced Placement Program courses and exams addressing various aspects of the field of economics: *AP Macroeconomics Advanced Placement (AP) Macroeconomics ( ...

curriculum, although more students take the former.

Topic outline

Basic Economic Concepts (8–12%)

* Scarcity, choice, and

opportunity cost In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effective it means if you chose one activity (for example ...

s * Production possibilities curve *

Comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

absolute advantage In economics, the principle of absolute advantage is the ability of a party (an individual, or firm, or country) to produce a good or service more efficiently than its competitors. The Scottish economist Adam Smith first described the principle o ...

, specialization, and exchange * Demand, supply, and market equilibrium * Macroeconomic issues: business cycle,

unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

growth Growth may refer to: Biology * Auxology, the study of all aspects of human physical growth * Bacterial growth * Cell growth * Growth hormone, a peptide hormone that stimulates growth * Human development (biology) * Plant growth * Secondary growth ...

Measurement of Economic Performance (12–16%)

* National income accounts **

Circular flow The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit ...

Gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...

**Components of gross domestic product ** Real versus nominal gross domestic product *Inflation measurement and adjustment ** Price indices **Nominal and real values **

Costs of inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...

Unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...

**Definition and

measurement Measurement is the quantification of attributes of an object or event, which can be used to compare with other objects or events. In other words, measurement is a process of determining how large or small a physical quantity is as compared ...

**Types of unemployment ** Natural rate of unemployment

National Income and
Price Determination Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...
(10–15%)

Aggregate demand In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called effective demand, though at other times this term is distinguished. This is ...

**Determinants of aggregate demand ** Multiplier and crowding-out effects *

Aggregate supply In economics, aggregate supply (AS) or domestic final supply (DFS) is the total supply of goods and services that firms in a national economy plan on selling during a specific time period. It is the total amount of goods and services that firms ...

** Short-run and long-run analyses ** Sticky versus flexible wages and prices **Determinants of aggregate supply * Macroeconomic Equilibrium **Real

output Output may refer to: * The information produced by a computer, see Input/output * An output state of a system, see state (computer science) * Output (economics), the amount of goods and services produced ** Gross output in economics, the value of ...

and price level **Short and long run **Actual versus full-employment output **Economic fluctuations

Financial Sector (15–20%)

Financial sector: *

Money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

, and

financial market A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets ...

s ** Definition of

financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than other tangible assets, such as ...

s: money,

stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemical ...

s ** Time value of money (present and future value) ** Measures of money supply ** Banks and creation of money **

Money demand In monetary economics, the demand for money is the desired holding of financial assets in the form of money: that is, cash or bank deposits rather than investments. It can refer to the demand for money narrowly defined as M1 (directly spendable ...

** Money market **

Loanable funds market In economics, the loanable funds doctrine is a theory of the market interest rate. According to this approach, the interest rate is determined by the demand for and supply of loanable funds. The term ''loanable funds'' includes all forms of credit, ...

Central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...

and control of the money supply ** Tools of central bank policy ** Quantity theory of money ** Real versus

nominal interest rate In finance and economics, the nominal interest rate or nominal rate of interest is the rate of interest stated on a loan or investment, without any adjustments or fees. Examples of adjustments or fees # An adjustment for inflation(in contrast with ...

Inflation, Unemployment, and Stabilization Policies (20–30%)

* Fiscal and monetary policies ** Demand-side effects **

Supply-side Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit fr ...

effects ** Policy mix ** Government deficits and debt * Inflation and unemployment ** Types of inflation ** Demand-pull inflation ** Cost-push inflation ** The Phillips curve: short run versus long run ** Role of expectations

Economic Growth and Productivity (5–10%)

Economic Growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...

and Productivity: **

Investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

human capital Human capital is a concept used by social scientists to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education. Human capital has a substantial ...

** Investment in

physical capital Physical capital represents in economics one of the three primary factors of production. Physical capital is the apparatus used to produce a good and services. Physical capital represents the tangible man-made goods that help and support the produc ...

Research and development Research and development (R&D or R+D), known in Europe as research and technological development (RTD), is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existi ...

, and technological progress ** Growth policy

Open Economy: International Trade and Finance (10–15%)

Balance of payments In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...

accounts **

Balance of trade The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...

Current account Current account or Current Account may refer to: * Current account (balance of payments), a country's balance of trade, net of factor income and cash transfers * Current account (banking) A transaction account, also called a checking account, ch ...

** Capital account *

Foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspec ...

** Demand for and supply of foreign exchange **

Exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

determination **

Currency appreciation and depreciation Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system in which no official currency value is maintained. Currency appreciatio ...

Net export The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...

s and

capital flow In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. At the macroeconomic level, "the nation's capital stock includes buildings, eq ...

s * Links to financial and goods markets

Exam

Multiple Choice (2/3 of Score)

*60 Questions in 70 Minutes *Reflects Topic Outline Above *Example: 3-6 Questions on Economic Growth.

Free Response (1/3 of Score)

* 3 Questions in 60 Minutes (with 10 minutes of recommended reading and planning time)

Score distribution

The exam was first held in 1989, along with Microeconomics. Grade distributions since 2011 are as follows:

Criticism

Tawni Ferrarini, James Gwartney, and John Morton have written that the examination does not adequately cover recent advances in the field: "The AP macroeconomics exam and resources largely reflect the simplistic Keynesian view from the 1960s and 1970s." The College Board updates the AP Macroeconomics curriculum with the guidance of college and high school economics instructors. The most recent update was published in 2019.College Board, ''AP Economics Course and Exam Description'' (2019)
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References

AP:Macroeconomics

Study Resources

* * Reffonomics.com {{Glossaries of science and engineering Economics education Advanced Placement