Build the foundations of AP Macroeconomics by connecting scarcity, opportunity cost, production possibilities, comparative advantage, specialization, and mutually beneficial trade.
Economics is the study of
business.
government regulation.
central planning.
how societies manage their scarce resources.
society, politics, and government combined.
Assume that in the country of Zeta, the civilian noninstitutional population aged 16 and over is 1,000,000. The labor force participation rate is 70%, the unemployment rate is 9%, and the natural rate of unemployment is 5\%.
Consumer goods and capital goods are produced in the country of Zeta. Draw a correctly labeled graph of the production possibilities curve for Zeta. Indicate a point, labeled A, that represents the current state of Zeta's economy.
Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country.
Draw a correctly labeled graph of the production possibilities curve for Sweden. Place food on the horizontal axis and capital goods on the vertical axis. Plot the relevant numerical values on the graph.
On your graph in part (a), indicate the following.
A point that represents an efficient level of production, labeled E
A point that represents an inefficient level of production, labeled I
A point that represents an unattainable level of production, labeled U
Assume Sweden moves from producing 20 units of food and 60 units of capital goods to producing 30 units of food and 40 units of capital goods. What will happen to economic growth in Sweden in the future?
Which country has the comparative advantage in the production of capital goods? Explain.
Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.
Which statement best describes the law of demand?
When price increases, demand decreases.
When price increases, demand increases.
Price and quantity demanded are inversely related.
Price and quantity demanded are directly related.
The demand curve is always upward sloping.
