STEP 1 Set Up Your Study Program 3
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 19
3 Take Diagnostic Exams 19
Diagnostic Exam:AP Microeconomics 23
Diagnostic Exam:AP Macroeconomics 28
STEP 3 Develop Strategies for Success 41
4 How to Approach Each Question Type 41
Section Ⅰ:Multiple-Choice Questions 41
Section Ⅱ：Free-Response Questions 44
STEP 4 Review the Knowledge You Need to Score High 49
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
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(AD) 201
Aggregate Supply(AS) 204
Macroeconomic Equilibrium 207
The Trade-Off Between Inflation and Unemployment 212
15 Fiscal Policy,Economic Growth,and Productivity 219
Expansionary and Contractionarv Fiscal Policy 219
Difficulties of Fiscal Policy 223
Economic Growth and Productivity 227
16 Money,Banking,and Monetary Policy 234
Money and Financial Assets 234
Fractional Reserve Banking and Money Creation 241
Monetary Policy 243
17 International Trade 251
Comparative Advantage and Gains from Trade 251
Balance of Payments 255
Foreign Exchange Rates 257
Trade Barriers 260
STEP 5 Build Your Test-Taking Confidence 267
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 351
Bibliography 351
Web Sites 353
Glossary 355
Important Formulas and Conditions 363