WVHS AP Macroeconomics

Question 1

What is scarcity?

Answer 1

The condition in which our wants are greater than the limited resources available to satisfy those wants

Question 2

What is a market economy?

Answer 2

An economy that relies chiefly on market forces to allocate goods and resources and to determine prices

Question 3

What is a command economy?

Answer 3

An economy in which production, investment, prices, and incomes are determined centrally by a government

Question 4

What are macroeconomics?

Answer 4

The branch of economics that deals with human behavior and choices as they relate to highly aggregate markets (such as the goods and services market) or the entire economy.

Question 5

What is an opportunity cost?

Answer 5

The most highly valued opportunity or alternative forfeited when a choice is made.

Question 6

What is specialization?

Answer 6

A method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas.

Question 7

What is trade?

Answer 7

The action of buying and selling goods and services.

Question 8

What is a comparative advantage?

Answer 8

The situation in which a country can produce a good at lower opportunity cost than another country

Question 9

What is an absolute advantage?

Answer 9

The ability of a given party, individual or firm to produce more of a good or service than competitors, using the same amount of resources.

Question 10

What are transfers?

Answer 10

Payments ti persons that are not made in return for goods and services currently supplied.

Question 11

What is inflation?

Answer 11

An increase in the price level resulting in a depreciation of the value of currency.

Question 12

What is gross domestic product? (GDP)

Answer 12

The total market value of all the goods and services produced annually within a country’s borders.

Question 13

What is consumer price index? (CPI)

Answer 13

A widely cited index number for the price level; the weighted average of prices of a specific set of goods and services purchased by a typical household.

Question 14

What is producer price index? (PPI)

Answer 14

The measure of the average price of a wide range of capital goods.

Question 15

What is deflation?

Answer 15

Reduction of the general level of prices in the economy.

Question 16

What is a gross domestic product (GDP) deflator?

Answer 16

The measure of the level of prices of all nee, domestically produced, final goods and services in an economy.

Question 17

What is natural unemployment?

Answer 17

Unemployment caused by frictional and structural factors in the economy. Natural unemployment rate=frictional unemployment rate and structural unemployment rate.

Question 18

What is structural unemployment?

Answer 18

The unemployment that occurs when there are more jobs demanded than there are available.

Question 19

What is frictional unemployment?

Answer 19

The type of unemployment when a worker chooses to leave one job in order to find a better place to employ his skills.

Question 20

What is cyclical unemployment?

Answer 20

The type of unemployment that goes along with the business cycle. ( When the economy grows, unemployment shrinks and vise-versa)

Question 21

What is considered full employment?

Answer 21

Is the level of employment rates when there is no cyclical employment

Question 22

What is aggregate demand?

Answer 22

Is the total demand for the final goods and services in the economy (Y) at a given time and price level

Question 23

What is aggregate supply?

Answer 23

Is the total supply of goods and services that firms in a national economy plan on selling during a specific time period

Question 24

What is the business cycle?

Answer 24

A cycle or series of cycles of economic expansion and contraction.

Question 25

What is the definition of depreciation?

Answer 25

Decrease in the value of a currency relative to other currencies.

Question 26

Describe monetary policy.

Answer 26

It is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

Question 27

Describe output in regards of macroeconomics.

Answer 27

In economics it is the quantity of goods or services produced in a given time period, by a firm, industry, or country, whether consumed or used for further production.

Question 28

According to economist, what is the definition of money?

Answer 28

A common currency; a medium of exchange. An open demand to trade.

Question 29

What is a fractional reserve banking?

Answer 29

Is the practice whereby a bank retains funds equal to only a portion of the amount of its customers' deposits as readily available reserves (currency on hand at the bank plus deposit accounts for that bank at the central bank) from which to satisfy demands for payment.

Question 30

Describe the concept of securities/ bonds.

Answer 30

They are a fixed interest financial asset issued by governments, companies, banks, public utilities and other large entities.

Question 31

What are loanable funds?

Answer 31

They are the money available in commercial banks and lending institutions available for firms and households to finance expenditures, either investments or consumption.

Question 32

What is speculation when it comes to a macroeconomic term?

Answer 32

The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain.

Question 33

Describe open market operations.

Answer 33

Is an activity by a central bank to buy or sell government bonds on the open market. A central bank uses them as the primary means of implementing monetary policy.

Question 34

What are reserve requirements?

Answer 34

Is a central bank regulation that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves (rather than lend out); required reserves are normally in the form of cash stored physically in a bank vault or deposits made with a central bank.

Question 35

Describe interest rates.

Answer 35

The percentage of a sum of money charged for its use. i.e. interest rate of a $100 loan is 5%, therefore to pay off the loan, you must pay $105.

Question 36

What is fiscal policy?

Answer 36

A government policy for dealing with the budget. Example: increase government spending or lower taxes.

Question 37

What is a deficit?

Answer 37

An excess of expenditure or liabilities over income or assets in a given period of one year.

Question 38

What is a debt?

Answer 38

The state of owing money, an overall accumulation of many years.

Question 39

What are expectations referring to the sense of economics?

Answer 39

Is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.

Question 40

What is considered labor?

Answer 40

The act of using resources into goods.

Question 41

What is land?

Answer 41

A resource that becomes a good at the end for a final product for the consumer to purchase.

Question 42

What is physical capital?

Answer 42

A factor of production (or input into the process of production), such as machinery, buildings, or computers.

Question 43

Explain investment.

Answer 43

The action or process of investing money for profit or material result.

Question 44

Describe consumption.

Answer 44

The using up of a resource.

Question 45

What is the definition of exports?

Answer 45

It is the process of sending (goods or services) to another country for sale.

Question 46

What is the definition of Imports?

Answer 46

It is the process of bringing (goods or services) into a country from abroad for sale.

Question 47

Explain appreciation of money.

Answer 47

It is a rise in the value of money caused by a fall in the general price.

Question 48

Explain economics.

Answer 48

The branch of knowledge concerned with the production, consumption, and transfer of wealth.

Question 49

What is meant by disposable income?

Answer 49

It is income remaining after deduction of taxes and other mandatory charges, available to be spent or saved as one wishes.

Question 50

What are sticky wages/ prices?

Answer 50

It refers to when wages/ prices are unmovable or resistant to change.