AP®︎ Macroeconomics: Topic 3.1 Flashcards

Master key terms and definitions for Topic 3.1 of AP Macroeconomics – Aggregate Demand (AD) to help you prep for quizzes and the AP exam.

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Term

Aggregate Demand Curve

Definition

A downward-sloping graph showing the relationship between price level and real GDP demanded.

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Aggregate Demand Curve
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A downward-sloping graph showing the relationship between price level and real GDP demanded.

MOD-2.AMOD-2.A.1
Components of Aggregate Demand
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Consumption, investment, government spending, and net exports; together summarized as C + I + G + (X - M).

MOD-2.AMOD-2.A.1
Real Wealth Effect
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A higher price level reduces purchasing power, lowering consumption; a lower price level does the opposite.

MOD-2.AMOD-2.A.2
Interest Rate Effect
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A higher price level raises interest rates and reduces investment; a lower price level lowers rates and increases investment.

MOD-2.AMOD-2.A.2
Exchange Rate Effect / Foreign Trade Effect
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A higher domestic price level reduces exports and raises imports, lowering net exports.

MOD-2.AMOD-2.A.2
Increase vs. Decrease in Aggregate Demand
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A rightward shift means more real GDP demanded at every price level; a leftward shift means less.

MOD-2.AMOD-2.A.3
Movement Along vs. Shift of Aggregate Demand
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Price-level changes move along the curve, while non-price changes in C, I, G, or net exports shift it.

MOD-2.AMOD-2.A.3