AP Macroeconomics Exam Instructions | Top 200 Vocabulary Words

The 200-word examination instruction list

AP Macroeconomics asks you to measure the economy and trace the effects of shocks or policy. Identify the model and time horizon before you draw or explain. Use real and nominal values carefully, and write the denominator for rates.

Start with the list, or jump to exam requirements, worked examples, the Fencing Method or practice. The list includes command words and subject vocabulary that helps you read the task.

Essential instructions

No.	Instruction or term	Meaning or action
1	Identify	Name or pick out the item the question specifies.
2	State	Express the required point directly and clearly.
3	Describe	Report the relevant characteristics, events or pattern.
4	Explain	Connect the result to its cause, mechanism or reasoning.
5	Compare	Set the items side by side on the same relevant feature.
6	Interpret	Say what a statement, result or display means in context.
7	Justify	Give evidence for the claim and explain how that evidence supports, qualifies or defends it.
8	Evaluate	Weigh relevant evidence or criteria before reaching a judgment.
9	Determine	Work from the given information to establish an answer.
10	Calculate	Use numbers or other given information to work out a result.
11	Estimate	Find an approximate answer using the available clues.
12	Sketch	Show the required shape, relationships and labels.
13	Construct	Produce the specified representation using the information given.
14	Label	Attach the correct name to the indicated part.
15	Select	Choose only the number of options requested.
16	Check	Test the answer against the original instruction or condition.
17	Analyze	Break the information into relevant parts and explain how they relate.
18	Hybrid digital	Check which questions are displayed digitally and which answers go in a paper booklet.
19	Multiple-choice question	Select the answer that satisfies the full stem and any limiting words.
20	Free-response question	Produce your own answer and complete each labelled task.
21	Stimulus	Use the figure, extract or other material attached to the question.
22	Answer each subpart	Treat each lettered instruction as a separate job.

Subject terms and tasks

No.	Instruction or term	Meaning or action
23	Identify the macroeconomic model	Choose the model that represents the question’s markets, variables and time horizon.
24	Draw a correctly labelled graph	Label axes, curves and equilibria, then show any required shift or movement.
25	State the short-run effect	Give the direction under the model’s short-run assumptions.
26	Trace long-run adjustment	Identify what changes after the initial shock and where output or prices settle under the model.
27	Gross domestic product	The market value of final goods and services produced domestically during a period.
28	Nominal GDP	Value output at current prices.
29	Real GDP	Measure output after adjusting for price changes.
30	GDP deflator	Divide nominal GDP by real GDP and multiply by 100 using consistent bases.
31	Final good	A good produced for final use rather than further production in the measured transaction.
32	Intermediate good	A good used in producing another good and omitted as a separate final output in GDP.
33	Expenditure approach	Add consumption, investment, government purchases and net exports.
34	Transfer payment	A payment without a current good or service in return, excluded from government purchases in GDP.
35	Gross investment	Include new capital formation and inventory changes in the stated accounting framework.
36	Net exports	Subtract imports from exports.
37	Consumer price index	Track the price of a specified consumer basket relative to a base period.
38	Inflation rate	Find the percentage change in the relevant price index.
39	Deflation	A decline in the overall price level.
40	Disinflation	A decrease in the inflation rate.
41	Nominal wage	Pay measured in current money.
42	Real wage	Pay adjusted for purchasing power.
43	Labour force	Add employed and unemployed people under the stated definitions.
44	Unemployment rate	Divide unemployed people by the labour force and multiply by 100%.
45	Labour force participation rate	Divide the labour force by the eligible population specified.
46	Discouraged worker	A person who wants work but has stopped looking for labour-market reasons and is excluded from the standard labour force count.
47	Frictional unemployment	Unemployment associated with job search and transitions.
48	Structural unemployment	Unemployment linked to a mismatch between available jobs and workers’ skills or locations.
49	Cyclical unemployment	Unemployment tied to fluctuations in aggregate activity.
50	Natural rate of unemployment	The unemployment rate associated with full-employment output in the model.
51	Business cycle	Fluctuations in aggregate activity, including expansions and contractions.
52	Output gap	Compare actual output with potential output under the stated sign convention.
53	Recessionary gap	Actual real output is below potential output.
54	Inflationary gap	Actual real output exceeds potential output.
55	Aggregate demand	The quantity of domestic real output demanded at each overall price level in the model.
56	Short-run aggregate supply	The real output producers supply at each price level while some input costs or expectations are slow to adjust.
57	Long-run aggregate supply	The economy’s potential real output in the standard vertical supply model.
58	Adverse supply shock	A disturbance such as increased input costs that can reduce short-run aggregate supply.
59	Stagflation	Weak output or employment occurs alongside rising prices.
60	Expansionary fiscal policy	Use higher government purchases or lower taxes to stimulate aggregate demand, under the model.
61	Contractionary fiscal policy	Use lower government purchases or higher taxes to reduce aggregate demand, under the model.
62	Automatic stabiliser	A tax or transfer feature that offsets part of the cycle without a new policy decision.
63	Marginal propensity to consume	Divide the change in consumption by the change in disposable income.
64	Marginal propensity to save	Divide the change in saving by the change in disposable income.
65	Spending multiplier	In the simple fixed-price model, use one divided by one minus the marginal propensity to consume.
66	Tax multiplier	In the simple lump-sum model, use the negative of the marginal propensity to consume divided by one minus that propensity.
67	Balanced-budget multiplier	Under simple model assumptions, equal increases in purchases and lump-sum taxes raise output by the amount of the increase.
68	Budget deficit	Government outlays exceed revenue over the stated period.
69	National debt	The accumulated outstanding government borrowing measured at a point in time.
70	Crowding out	Public borrowing can raise real interest rates and reduce private investment in the relevant model.
71	Money supply	Use the definition or monetary aggregate specified in the question.
72	Demand for money	The amount of money balances people wish to hold at different nominal interest rates.
73	Money market	Use money demand and supply to analyse the nominal interest rate in the model.
74	Market for loanable funds	Use borrowing and saving relationships to analyse the real interest rate.
75	Bank balance sheet	Distinguish assets from liabilities and track both sides of a transaction.
76	Bank reserves	Funds a bank holds in its central bank account or as vault cash in the usual model.
77	Reserve requirement	The required share of relevant deposits held as reserves when the problem specifies one.
78	Excess reserves	Reserves above the stated requirement in a simplified banking problem.
79	Simple deposit multiplier	With the required assumptions and a positive reserve ratio, use its reciprocal to find the maximum multiple expansion.
80	Open market operation	A central bank purchase or sale of securities that changes banking-system reserves.
81	Administered interest rate	A rate set by the central bank that can influence market rates.
82	Ample-reserves framework	A framework in which administered rates are central to steering short-term interest rates.
83	Monetary policy transmission	Trace a policy change through interest rates and spending to output and prices.
84	Nominal interest rate	An interest rate stated before adjustment for inflation.
85	Real interest rate	An inflation-adjusted interest rate, approximately nominal rate minus inflation for small rates.
86	Short-run Phillips curve	Show the modelled relationship between inflation and unemployment for given expectations and supply conditions.
87	Long-run Phillips curve	A vertical curve at the natural rate of unemployment in the standard model.
88	Expected inflation	The inflation rate decision-makers anticipate.
89	Economic growth	A sustained increase in potential real output, or in real output per person when the question specifies that measure.
90	Productivity	Output per unit of input, often per hour of labour.
91	Physical capital	Produced assets used to produce other goods and services.
92	Human capital	Education, skills and other productive capacities embodied in people.
93	Exchange rate	The price of one currency in terms of another, using the quotation specified.
94	Currency appreciation	The currency buys more of another currency than before.
95	Currency depreciation	The currency buys less of another currency than before.
96	Foreign exchange market	Use demand and supply for the named currency and label the price in units of the other currency.
97	Current account	Record trade in goods and services plus net primary and secondary income in the usual balance-of-payments framework.
98	Financial account	Record cross-border transactions in financial assets and liabilities under the stated sign convention.
99	Balance of payments	An accounting record of transactions between residents and nonresidents.
100	Net capital inflow	Foreign investment into the domestic economy exceeds domestic investment abroad under the stated convention.
101	Purchasing power	The quantity of goods and services a money amount can buy.

Economic reasoning, models and graphs

No.	Instruction or term	Meaning or action
102	Change in equilibrium	Compare the old and new intersections after showing which curve shifts.
103	Ceteris paribus	Hold other relevant factors fixed when isolating a relationship.
104	Economic model	Use its assumptions and variables to explain the outcome it predicts.
105	Endogenous variable	A quantity determined inside the model.
106	Exogenous change	A change taken as given from outside the model.
107	Price signal	A change in price that communicates scarcity and affects incentives.
108	Quantity demanded	The amount buyers would purchase at the stated price.
109	Quantity supplied	The amount sellers would offer at the stated price.
110	Market clearing	The price equates planned purchases and sales in the model.
111	Initial equilibrium	Label the intersection before the specified change.
112	New equilibrium	Label the intersection after the change.
113	Horizontal axis	Identify the quantity plotted along the bottom of the graph.
114	Vertical axis	Identify the price, rate or other variable plotted up the side.
115	Change in a determinant	Name the factor that moved a curve and state which curve responds.
116	Indeterminate effect	When changes push an outcome in opposite directions, the net direction depends on their relative sizes.
117	Direct effect	The first effect of a change within the mechanism specified.
118	Indirect effect	An effect that arises through an intermediate change.
119	Policy instrument	A tool used to influence the stated economic objective.
120	Policy objective	The result a policy is intended to achieve.
121	Distributional effect	Explain which people or groups gain, lose or bear a burden.
122	Percentage point	Subtract two percentage rates to measure their difference in points.
123	Relative percentage change	Divide the change by the appropriate baseline and multiply by 100%.
124	Per capita	Divide the total by the population represented.
125	Real value	Use a measure adjusted for changes in the price level.
126	Nominal value	Use the amount measured in current money.
127	Market incentive	A cost or reward that changes the payoff from an economic choice.
128	Scarcity	Limited resources require choices among competing uses.
129	Trade-off	Identify the gain from a choice and the competing benefit sacrificed.
130	Marginal analysis	Compare the benefits and costs of the next increment.
131	Short run	Use the period in which the model treats some quantities or costs as fixed.
132	Long run	Use the period in which the model permits the specified adjustments.
133	Binding constraint	A restriction that changes the feasible choice or market outcome.
134	Nonbinding constraint	A restriction that leaves the model’s outcome unchanged.
135	Comparative statics	Compare equilibria before and after a specified change.
136	Net benefit	Subtract relevant costs from relevant benefits.
137	Draw an arrow	Use an arrow to show the direction of a shift or movement when it makes the change clear.
138	Equilibrium condition	State the equality or adjustment rule defining equilibrium in the chosen model.
139	Label the units	Write units that distinguish prices, rates, amounts and percentages.
140	Find the difference	Subtract on the same basis and retain the unit.
141	Infer the direction	Use the model or evidence to say whether the variable rises, falls or remains unchanged.
142	Read the axes	Identify the quantities, units and intervals on a graph before using a value.
143	Gradient from a graph	Calculate change in the vertical quantity per change in the horizontal quantity.
144	Calculate a rate	Divide the relevant change or quantity by the appropriate time or other denominator.
145	Calculate the percentage change	Divide the change by the starting value and multiply by 100.
146	Unit rate	Calculate the amount corresponding to one unit of the other quantity.
147	Initial value	The value at the stated starting point.
148	Final value	The value at the stated end point.
149	Ratio	Compare two quantities by division in the order specified.
150	Relative change	Divide the difference by the initial value when that baseline is meaningful.
151	Direction of change	State whether the quantity increases, decreases or stays unchanged.
152	Magnitude	The size of a quantity, considered separately from direction.
153	Unit conversion	Use a conversion factor to change the units while keeping the quantity the same.
154	Representative sample	Check whether the selected cases reflect the population of interest.
155	Aggregate price level	Use the overall price measure on an AD–AS graph rather than the price of one good.
156	Long-run self-adjustment	Trace how input prices or expectations change short-run aggregate supply after an output gap.
157	Potential output	The level of real output consistent with full employment in the model.
158	Policy rate	Identify the interest rate the central bank targets or sets under the specified framework.
159	Estimate from the graph	Use the plotted trend to obtain a sensible approximate value.
160	Interpret the slope	Give the predicted change in response per one unit increase in the explanatory variable.
161	Interpret the intercept	Explain the predicted response at zero if zero makes sense in context.
162	Line of best fit	Draw a line representing the overall pattern of plotted data.
163	Scatterplot	Describe form, direction, strength and unusual points when relevant.
164	Fiscal stance	Identify whether the stated tax and spending changes tend to raise or lower aggregate demand.
165	Extrapolation	Recognise when the requested prediction is outside the observed input range.
166	Difference versus association	Distinguish a numerical group contrast from an inference about the relationship.
167	Use the scale of the display	Check axis intervals and group labels before comparing.
168	Compare two proportions	Use the correct denominators and report the direction of the contrast.
169	Percentage within a group	Use only the stated group as the denominator.
170	Choose an appropriate display	Match the display to the variable type and comparison.
171	Exact value	Leave the answer in a form that preserves its full value.
172	Give units	Attach the required measurement unit to the final result.
173	Find the exact value	Retain radicals, fractions, logarithms or π in exact form where appropriate.
174	Set up an equation	Translate the given conditions into a mathematical relationship.
175	Check the solution	Substitute the result into the original equation to verify it.
176	In terms of	Use the specified quantity or symbol in the final expression.
177	Solve	Find the values that satisfy the equation or inequality.
178	Substitute	Replace a variable with the given value or expression.
179	Decimal places	Give the requested number of digits to the right of the decimal point.
180	Significant figures	Give the requested number of meaningful digits.
181	Round	Adjust a number to the requested precision using the next digit.
182	Plot	Place the supplied points on the correct axes and scale.
183	Range of values	Find all possible outputs under the stated restrictions.
184	Rate of change	Find the change in one quantity per unit change in another.
185	Interpolate	Estimate within the range covered by the data.
186	Extrapolate	Estimate outside the observed range using an assumed pattern.
187	Residual	Find the observed value minus the model’s predicted value.
188	Baseline scenario	Use the stated reference case against which an intervention is compared.
189	Comparative advantage	Explain specialisation using lower opportunity cost.
190	Economies of scale	Average cost per unit can decline as production increases.
191	Gross domestic product per capita	Divide domestic production value by population for the period.
192	Exchange-rate quotation	State which currency is being priced and the units of the other currency.
193	Sample size	Check how many observations or individuals contribute to the result.

Evidence and other exam wording

No.	Instruction or term	Meaning or action
194	Contrast	Show how the items differ on a shared point of comparison.
195	Infer	Use clues to reach a conclusion the material implies.
196	Predict	Use available evidence to say what is likely to happen.
197	Suggest	Offer a plausible answer suited to the information given.
198	Assess	Judge the extent, value or strength of something using evidence.
199	Discuss	Develop a structured response that considers the relevant issues.
200	Distinguish	Give the feature that lets the reader tell two things apart.

What the AP Macroeconomics exam requires

College Board lists the regular 2027 exam for May 7. The exam is hybrid digital. Answer multiple-choice questions and read free-response prompts in Bluebook, then handwrite the free responses in the supplied booklet.

Exam component	Format and weighting
I · Multiple choice	60 questions in 70 minutes, worth about two-thirds of the score.
II · Free response	3 questions in 60 minutes, including 10 minutes for reading, worth about one-third of the score. One long question counts for half the section and two short questions count for one-quarter each.
Calculator policy	A four-function calculator is allowed in both sections, including the built-in Desmos four-function calculator. Handheld calculators with storage capabilities, including scientific and graphing calculators, are excluded.

AP is a U.S.-based exam programme taken domestically and internationally. Confirm registration and local reporting time with your school or test centre. Use the official materials for your exact subject and exam year.

Read the task before choosing a method

A loanable-funds graph normally uses the real interest rate. A money-market graph normally uses the nominal interest rate. A foreign-exchange graph needs the name of the currency and a quotation in units of the other currency. Choose the graph before predicting a shift.

Worked examples for common exam instructions

Calculate and interpret a change in inflation

Prompt. A price index rises from 120 to 126 over one year. Find the inflation rate.

Answer. The index increased by 6 relative to its starting level of 120. The inflation rate is 6/120 × 100%, or 5%.

Trace an adverse supply shock

Prompt. A sharp rise in energy input costs shifts short-run aggregate supply. With aggregate demand unchanged, predict the short-run effect.

Answer. Short-run aggregate supply shifts left. In the standard AD–AS model, the new equilibrium has lower real output and a higher price level.

Apply a multiplier with its assumptions

Prompt. In a simple fixed-price model with MPC = 0.8, government purchases rise by $10 billion. Find the modelled change in output.

Answer. The spending multiplier is 1/(1−0.8) = 5. Output increases by $50 billion under the model’s assumptions.

Interpret currency appreciation

Prompt. The exchange rate changes from 100 yen per dollar to 120 yen per dollar. Which currency appreciates against the other?

Answer. The dollar appreciates against the yen because one dollar now buys more yen. The yen depreciates against the dollar.

Use the Fencing Method to build an answer

Begin with one accurate answer. Add a detail that fixes it to the question, then add the rule or mechanism that justifies it. Transfer the same structure to a fresh case.

Start. Real output falls.

Add context. An adverse supply shock shifts short-run aggregate supply left.

Add reasoning. With aggregate demand fixed, the new short-run equilibrium has lower real output and a higher overall price level.

Transfer. Compare a fall in aggregate demand. Identify why its prediction for the price level differs.

Practise with the 200 terms

Choose one definition, one diagram task and one explanation. In each response underline the economic variable, then check the units and the mechanism. Try changing one assumption and work through the effect again.

Find the correct denominator

Try it. A population has 900 employed people and 100 unemployed people in the labour force. What is the unemployment rate?

Check. 100/(900+100) × 100%, or 10%. People outside the labour force do not enter this denominator.

Frequently asked questions

What makes a graph count as evidence?

Label each axis, the curves that matter, and the initial or new equilibrium requested. Keep the graph and written explanation consistent. Use the specific question’s scoring guidelines to see which labels matter.

Official sources and next reading

College Board AP Macroeconomics exam information and released questions · AP calculator policy · 2027 AP exam schedule

Top 200 Vocabulary Word List for AP Macroeconomics | Must Know Words for Common Examination Instructions