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Presidents 1st Semester > AP Econ > Flashcards

AP Econ Flashcards

1
Q

Absolute Advantage

A

the ability to produce something more efficiently

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2
Q

Capital

A

productive equipment or machinery

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3
Q

Comparative Advantage

A

the ability to produce something with a lower opportunity cost

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4
Q

Economics

A

a social science that studies how resources are used and is often concerned with how resources can be used to their fullest potential

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5
Q

Efficiency

A

using resources to their maximum potential

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6
Q

Labor

A

all human activity that is productive

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7
Q

Land

A

all natural resources

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8
Q

Law of Increasing Costs

A

law that states that when more of a product is initially being produced, the higher the opportunity cost will be to produce still more

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9
Q

Macroeconomics

A

economic problems encountered by the nation as a whole

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10
Q

Microeconomics

A

economic problems faced by individual units within the overall company

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11
Q

Opportunity Cost

A

the amount of one good that must be sacrificed to obtain an alternative good

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12
Q

Positive Economics

A

economic analysis that draws conclusions based on logical deduction or induction (value judgements are avoided)

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13
Q

Production Possibilities Frontier

A

the combinations of two goods that can be produced if the economy uses all of its resources fully and efficiently

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14
Q

Normative Economies

A

economies involving value judgement

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15
Q

Resource

A

anything that can be used to produce a good or service

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16
Q

Allocative Efficacy

A

term for resources being deployed to produce just the right amount of each product to satisfy society’s wants

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17
Q

Capitalism

A

term for resources being deployed to produce just the right amount of each product to satisfy society’s wants

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18
Q

Circular Flow Diagram

A

diagram that shows how households and firms are related by the exchange of resources and products

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19
Q

Command Economy

A

economy in which the central government dictates what will or will not be produced and who gets what

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20
Q

The Law of Demand

A

law that states that when the price of a product increases, the quantity demanded decreases, ceteris paribus

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21
Q

Law of Supply

A

law that states that when the price of a product increases, the quantity supplied increases, ceterus paribus

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22
Q

Mixed Economy

A

a blend of government commands and capitalism

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23
Q

Consumption Expenditures

A

all the goods and services sold to households

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24
Q

Disposable Personal Income (DPI)

A

the income of households after taxes have been paid

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25
Q

Government Expenditures

A

goods and services sold to governments

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26
Q

Gross Domestic Product (GDP)

A

dollar value of production within a nation’s borders

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27
Q

Gross National Product (GNP)

A

dollar value of production by a country’s citizens

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28
Q

Intermediate Sales

A

sales to firms that will incorporate the item into their final product

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29
Q

Investment Sales

A

sales to firms that will incorporate the item into their final product

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30
Q

Investment Expenditures

A

expenditures by businesses on plants and equipment plus the change in business inventories

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31
Q

National Income (NI)

A

the income earned by households and profits earned by firms after subtracting depreciation and indirect business taxes

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32
Q

National Income and Product Accounts

A

a comprehensive group of statistics that measures various aspects of the economy’s performance

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33
Q

Net Exports

A

exports minus imports

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34
Q

Personal Income (PI)

A

income received by households

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35
Q

Real Gross Domestic Product (RGDP)

A

GDP adjusted for the price changes

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36
Q

Underground Economy

A

all the illegal production of goods and services and legal production that does not pass through markets

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37
Q

GDP

A

C+I+G+X

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38
Q

GDP per capita

A

GDP/population

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39
Q

Consumer Price Index (CPI)

A

measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services

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40
Q

Cyclical Unemployment

A

loss of jobs by individuals during a recession and the corresponding slowdown in production

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41
Q

Fisher’s Hypothesis

A

Nominal Interest Rate= Real Interest Rate + Expected Inflation

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42
Q

Frictional Unemployment

A

state of being out of work because the person is in between jobs

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43
Q

GDP Deflator

A

measure of the level of prices in the economy

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44
Q

Hidden Unemployment

A

describing those who are able to work but who are not actively seeking employment because they are discouraged about their prospects for finding employment

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45
Q

Inflation

A

a sustained rise in most prices in the economy

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46
Q

Menu Cost

A

the misallocation of resources because of inflation

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47
Q

nonaccelerating inflation rate of unemployment

A

the full employment rate of unemployment; when employment falls below this rate, inflation accelerates

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48
Q

seasonal unemployment

A

state of being out of work because of the time of year

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49
Q

structural unemployment

A

state of being out of work because the economy is structured, or set up, to a person’s disadvantage

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50
Q

unemployment rate

A

the number of unemployed persons divided by the labor force

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51
Q

CPI

A

(Total Cost this Period/Total Cost Base Period) x 100

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52
Q

Inflation Rate

A

[(this period CPI-previous period CPI)/previous period CPI] x 100

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53
Q

GDP Deflator

A

(GDP/Real GPD) x 100

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54
Q

Real GDP

A

(GDP/GDP deflator) x 100

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55
Q

Nominal Interest Rates

A

Real Interest Rate + Expected Inflation

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56
Q

Unemployment Rate

A

Number of unemployed/civilian labor force

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57
Q

Aggregate Demand

A

the demand for all goods and services by all households, business, governments, and foreigners

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58
Q

Aggregate Supply

A

the supply of all goods and services by all producers in the economy

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59
Q

Break-even point

A

point where the consumption function crosses the 45 degree line and income equals spending so that saving is zero

60
Q

Business Cycle

A

point where the consumption function crosses the 45 degree line and income equals spending so that saving is zero

61
Q

Classical Economic Theory

A

the predominant paradigm in economic analysis from about 1800 until 1930, based on Say’s Law

62
Q

Consumption Theory

A

the relationship between consumer spending and income

63
Q

Equilibrium Price Level

A

the price level that equates aggregate supply and aggregate demand, the average level of prices in the economy

64
Q

Equilibrium Quantity

A

the amount of output that results in no shortage or surplus, the amount of goods and service bought and sold in the economy

65
Q

Expansion

A

a sustained improvement in economic activity

66
Q

Keynesian Theory

A

theory that opposes Classical theory by emphasizing the short run and focusing on economies that are operating below full capacity

67
Q

Marginal Propensity to Consume (MPC)

A

idea that given an extra dollar, how much is spent?

68
Q

Multiplier

A

an initial change in spending in the economy that will have a magnified, or multiplied, effect on income

69
Q

Recession

A

a sustained decline in economic activity

70
Q

Say’s Law

A

theory that supply creates its own demand

71
Q

MPC

A

change in spending / change in income

72
Q

Multiplier

A

1/(1-MPC)

73
Q

Total Change in Income

A

Initial Change in Spending x Multiplier

74
Q

Automatic Stabilizers

A

government policies already in place that promote deficit spending during recessions and surplus budgets during expansions

75
Q

Crowding Out

A

the increase in interest rates and subsequent decline in spending that occurs when the government borrows money to finance a deficit

76
Q

Deficit

A

situation that exists when government spending exceeds tax revenues

77
Q

Fiscal Policy

A

changes in government spending and taxes to fight recessions or inflations

78
Q

Inflationary Gap

A

what occurs when the equilibrium quantity of output is above potential output

79
Q

Phillips Tradeoff

A

the inverse relationship between inflation and unemployment

80
Q

Rational Expectations

A

the idea that households and businesses will use all the information available to them when making economic decision

81
Q

Recessionary Gap

A

what occurs when the equilibrium quantity of output is below potential output

82
Q

Stagflation

A

term used to describe the situation when the economy experiences inflation and a recession simultaneously

83
Q

Surplus

A

spending by the government that is less than tax revenues

84
Q

Change in RGDP

A

Initial Change in Spending x Multiplier

85
Q

Certificate of Deposit

A

debt instrument that is similar to a savings account except the interest rate is slightly greater and the deposit cannot be drawn on without penalty

86
Q

Currency

A

coins and paper money

87
Q

Discount Rate

A

the rate of interest the FED charges when it makes loans to depository institutions

88
Q

Excess Reserves

A

the amount of any deposit that does not have to be held aside and may be used to make loans and buy investments

89
Q

Federal Reserves

A

the central bank of The United States

90
Q

Fiat Money

A

money that is not backed by any precious commodity

91
Q

Government Securities

A

IOUs that the government issues when it borrows money

92
Q

Liquidity

A

the ability to turn an asset into cash rapidly and without loss

93
Q

M1

A

currency, transaction accounts, and travelers’ checks

94
Q

M2

A

M1 plus savings accounts, certificates of deposit, and other liquid assets

95
Q

Money

A

anything that society generally accepts in payment for a good or service

96
Q

Money Multiplier

A

1/reserve requirement, the multiple by which the money supply will change because of a change in bank reserves

97
Q

Open Market Operations

A

activities in which the FED buys and sells government securities in the secondary market

98
Q

Required Reserves

A

the amount of any deposit that must be held aside and not used to make loans or buy investment

99
Q

Reserve Requirement

A

the percentage of any deposit that must be held aside and not used to amke loans or buy investments

100
Q

Savings Account

A

an account at a depository institution that earns interest while the funds are readily available but cannot be withdrawn with checks

101
Q

Secondary Market

A

place where government securities that have already been issued may be bought or sold

102
Q

Transaction Account

A

a checking account at a bank or a similar account at some other depository institution

103
Q

Money Multiplier

A

1/ Reserve Requirement

104
Q

Change in Money Supply

A

Money Multiplier x Change in Bank Reserves

105
Q

Board of Governors

A

executive board of the FED that makes major monetary policy decisions

106
Q

Demand Management Policy

A

monetary and fiscal policy

107
Q

Equation of Exchange

A

M x V = P x Q; the money supply times its velocity equals the price level times output

108
Q

Federal Open Market Supply (FOMS)

A

a committee within the FED that designs and executes the particular of monetary policy

109
Q

Monetarist

A

one who believes that changes in the money supply have a profound effect on the economy

110
Q

Monetary Neutrality

A

policy in which a change in the money supply would result in a proportional change in prices while real variables, such as the unemployment rate, would be unaffected

111
Q

Monetary Policy

A

changes in the money supply to fight recessions or inflations

112
Q

Money Demand

A

the amount that households and firms want to hold in currency and deposits

113
Q

Velocity of Money

A

describing the number of times the typical dollar of M1 or M2 is used to make purchases during a year

114
Q

Equation of Exchange

A

M x V = P x Q

115
Q

Capital Productivity

A

the amount of output per unit of plant and equipment

116
Q

Economic Growth

A

the amount of output per unit of plant and equipment

117
Q

Human Capital

A

the amount of output per unit of plant and equipment

118
Q

Labor Productivity

A

the amount of output per unit of labor

119
Q

Potential GDP

A

the amount that can be produced using resources fully and efficiently

120
Q

Potential GDP

A

the amount that can be produced using resources fully and efficiently

121
Q

Productivity

A

output per unit of input

122
Q

Total Productivity

A

the amount of all inputs

123
Q

Rule of 70

A

the amount of all inputs

124
Q

Appreciation

A

the increase of the value of a currency in terms of another currency

125
Q

Balance of Payments

A

an accounting of the funds that flow in and out of a country comprised of the capital account and the current account

126
Q

Balance of Trade

A

a nation’s exports minus its imports

127
Q

Capital Account

A

a portion of the balance of payments comprised of foreign purchases of US assets minus US purchases of foreign assets, plus the change in official reserves

128
Q

Closed Economy

A

a hypothetical economy with no foreign trade

129
Q

Current Account

A

a portion of the balance of payments comprised of the trade balance, net investment income, and net transfers

130
Q

Depreciation

A

the decrease of the value of a currency in terms of another currency

131
Q

Dumping

A

the practice or foreign producers selling a product in the domestic market for less than it cost to produce it

132
Q

Exchange Rate

A

the value of one country’s currency in terms of another’s

133
Q

Gold Standard

A

a unit of one currency that is equivalent to a stated amount of gold

134
Q

Import Quota

A

a limit on the amount of a product that can be imported

135
Q

Import Tariff

A

a tax on a specified import product

136
Q

Infant Industries

A

those industries that are just getting started, perhaps requiring trade restrictions

137
Q

Infant Industries

A

those industries that are just getting started, perhaps requiring trade restrictions

138
Q

Intervention

A

situation in which a nation or group of nations uses their official reserves to supply or demand a currency in order to alter the exchange rate

139
Q

Managed Float

A

an exchange rate regime where supply and demand determine exchange rates with occasional intervention when warranted

140
Q

Net Investment Income

A

amount US citizens earned as interest and dividends from abroad minus how much was paid to foreigners in interest and dividends

141
Q

Net Transfers

A

money our government and citizens send as gifts or aid to foreigners minus how much foreigners send to us in gifts and aid

142
Q

Official Reserves

A

government’s holdings of foreign currencies

143
Q

Open Economy

A

an economy with foreign trade

144
Q

Trade Deficit

A

excess of a nation’s imports over its exports

145
Q

Trade Surplus

A

excess of a nation’s exports of over its imports

146
Q

Balance of Payments

A

current account +capital account

Presidents 1st Semester (1 decks)

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