AP Macroecon vocab v.3 Flashcards
unlimited wants but limited resources
Scarcity
study of the economy as a whole or economic aggregate
Macroeconomics
study of small economics units such as individuals, firms, or markets
Microeconomics
Based on facts, avoids value judgements (what is)
Positive statements
Includes value judgements (what ought to be)
Normative statements
Making decisions based on increments
Marginal analysis
All the alternatives that we give up when we make a choice
Trade off
Most desirable alternative given up when you make a choice
Opportunity cost
Satisfaction
Utility
Marginal
Marginal
Distribute
Allocate
created for direct consumption
consumer goods
goods used to make consumed goods
Capital goods
Human made resource used to create other goods and services
Physical capital
Skills or knowledge gained by a worker through education and experience
Human capital
Measure of efficiency that shows the number of outputs per unit input
Productivity
Resources easily adaptable for producing either goods, straight line PPC
Constant opportunity cost
Producing more of one good increases the resource cost of the other good, bowed PPC
Law of increasing opportunity cost
Producer that can produce the most output or requires the least amount of inputs
Absolute advantage
Producers with the lowest opportunity cost
Comparative advantage
Agreed upon conditions that would benefit both countries
Terms of trade
Different quantities of goods that consumers are willing and able to buy at different prices
Demand
Inverse relationship between price and quantity demanded
Law of Demand
If price goes up for a product, that produce will be bought less and more of a similar product will be bought
Substitution effect
If the price goes down for a product, the purchasing power increases for consumers allowing them to purchase more
Income effect
The more you consume anything, the additional satisfaction you receive will start to decrease
Law of diminishing marginal utility
All other things held constant
Ceteris Paribus
Goods used in place of another one
Substitutes
Two goods that are bought and used together
Complements
As income increases, demand increases or as income falls, demand falls
Normal goods
As income increases, demand falls or as income falls, demand increases
Inferior goods
Different quantities of a good that sellers are willing and able to sell at different prices
Supply
Direct relationship between price & quantity supplied, as price increases, quantity produced increases and as price falls, quantity produced falls
Law of supply
Payment a government makes to a business or market to increase supply
Subsidy
Ambiguous
Indeterminate
Max legal price a seller can charge for a product, shortage
Price ceiling
Minimum legal price a seller can sell a product, surplus
Price floor
Profit=
revenue - cost
Per unit Opportunity Cost=
Opportunity cost/units gained
Output (OOO)=
Other goes over
Input (IOU)=
Other goes Under*The variable is resources or time
Production Possibilities Curve shifters
1.) Change in resource quantity or quality
2.) Change in technology
3.) Change in trade
Demand shifters
1.) Taste and preferences
2.) Number of consumers
3.) Price of related goods: substitutes and complements
4.) Income
5.) Futures expectations
6.) Price/Quantity demanded = no shift, only movement
Supply shifters
1.) Price/availability of input (resources)
2.) Number of sellers
3.) Technology
4.) Government actions: taxes and subsidies
5.) Expectation of future profit
6.) Price/Quantity supplied = no shift, only movement
Part of the economy run by individuals and businesses
Private sector
Part of the economy that is controlled by the government
Public sector
Payment for the factors of production like rent, wages, interest, and profit
Factor payments
When the government redistributes income like welfare or social welfare
Transfer payments
Government payments to businesses to increase supply
Subsidies
Dollar value of all final new goods and services produced within a country in one year
Gross domestic product (GDP)
GDP divided by population/per person
GDP per capita
Goods inside final goods that don’t count towards GDP
Intermediate goods
Goods that don’t wear out quickly and last over a long period of time
Durable goods
Goods that have a short life cycle
Nondurable goods
Workers that are actively looking for a job but aren’t working
Unemployment
Unemployment that is temporary or being between jobs and the person has transferable skills
Frictional unemployment
Unemployment based on time of year or nature of the job
Seasonal unemployment
Changes in the labor force that make some skills obsolete
Structural unemployment
Unemployment where automation and machinery replace workers
Technological unemployment
Unemployment caused by recession
Cyclical unemployment
Amount of unemployment that exists when the economy is healthy and growing, focuses on output and and not having too much unemployment
Natural rate of unemployment (NRU)
Focuses on Inflation and not having too little unemployment
Non-Accelerating Inflation Rate of Unemployment (NAIRU)
Some people are no longer looking for a job because they have given up
Discouraged workers
Someone who wants more hours and can’t get them but are still considered employed
Underemployed workers
Rising general level of prices and reduces purchasing power of money
Inflation
Decrease in general prices and causes people to hoard money
Deflation
Prices increasing at slower rates
Disinflation
Wage measured by dollars rather than purchasing power
Nominal wage
Wage adjusted for inflation
Real wage
GDP measured in current prices and doesn’t account for inflation from year to year
Nominal GDP
GDP expressed in constant or unchanging dollars and adjusts for inflation
Real GDP
Inflation Rate=
(New # - Old #/ Old #) x 100
GDP Deflator=
(Nominal GDP/Real GDP) x 100
Nominal GDP=
(Deflator)x(Real GDP)/100
% Change in GDP=
(Year 2 - Year 1/Year 1) x 100
GDP (Y)=
C+I+G+(X-M)
Consumer Spending + Investment Spending + Government Spending + (Exports - Imports)
Unemployment Rate=
(# of unemployed/# of people in the labor force) x 100
Consumer Price Index (CPI)=
(Price of market basket/Price of market in base year) x 100
