Editorial Robert Franek, Senior VP, Publisher Laura Braswell, Senior Editor Selena Coppock, Senior Editor Calvin Cato, Editor Meave Shelton, Editor Production Michael Pavese, Publishing Director Kathy Carter, Project Editor Michelle Krapf, Editor Michael Mazzei, Editor Michael Breslosky, Associate Editor Stephanie Tantum, Associate Editor Kristen Harding, Associate Editor Vince Bonavoglia, Artist Danielle Joyce, Graphic Designer Random House Publishing Team Tom Russell, Publisher Nicole Benhabib, Publishing Manager Ellen L. Reed, Production Manager Alison Stoltzfus, Managing Editor The Princeton Review, Inc. 111 Speen Street Suite 550 Framingham, MA 01701 E-mail: [email protected] Copyright © 2012 by The Princeton Review, Inc. Cover art © Jonathan Pozniak All rights reserved. Published in the United States by Random House, Inc., New York, and in Canada by Random House of Canada Limited, Toronto. The Princeton Review is not affiliated with Princeton University. eISBN: 978-0-30794581-5 Editor: Liz Rutzel Production Editor: Stephanie Tantum Production Coordinator: Deborah A. Silvestrini 2013 Edition v3.1 ACKNOWLEDGMENTS I would like to thank The Princeton Review team for their wonderful support during the creation of this book. Centre College generously provided computer resources. Peggy Pride, Clark Ross, and Claire Melican provided invaluable comments. I thank my children Austin and Ally for making me laugh even when deadlines loomed, and for not pushing that one button on the plastic box while I worked. None of this would have been possible without the kind support of my wife, Donna, who graciously tolerates my idealistic goal of showering the world with the joy of economics. The Princeton Review would like to thank Holly Jones for her work updating this edition. CONTENTS Cover Title Page Copyright Acknowledgments Introduction P I: H C S ART OW TO RACK THE YSTEM 1 About the AP Economics Exams 2 Preparing for the AP Economics Exams 3 Test-Taking Strategies P II: E R ART CONOMICS EVIEW 4 Review of Microeconomic Concepts 5 Basic Macroeconomic Concepts P III: T E ART ESTS AND XPLANATIONS 6 Microeconomics Practice Test 7 Microeconomics Answers and Explanations 8 Macroeconomics Practice Test 9 Macroeconomics Answers and Explanations Formula Sheet Index About the Author I NTRODUCTION WHAT IS THE PRINCETON REVIEW? The Princeton Review is an international test-preparation company with branches in all major U.S. cities and several abroad. In 1981, John Katzman started teaching an SAT prep course in his parents’ living room. Within five years, The Princeton Review had become the largest SAT prep program in the country. Our phenomenal success in improving students’ scores on standardized tests is due to a simple, innovative, and radically effective philosophy: Study the test, not just what the test claims to test. This approach has led to the development of techniques for taking standardized tests based on the principles the test writers themselves use to write the tests. The Princeton Review has found that its methods work not just for cracking the SAT, but for any standardized test. We’ve already successfully applied our system to the GMAT, LSAT, MCAT, and GRE, to name just a few. Obviously, you need to be well versed in economics to do well on the AP Economics Exams, but you should remember that any standardized test is partly a measure of your ability to think like the people who write standardized tests. This book will help you brush up on your AP Economics and prepare for the exam using our time-tested principle: Crack the system based on how the test is created. We also offer books and online services that cover an enormous variety of education and career-related topics. If you’re interested, check out our website at PrincetonReview.com. PART I How to Crack the System 1 About the AP Economics Exams