AP Macroecon vocab v.4s.2 Flashcards
1
Q
unlimited wants but limited resources
A
Scarcity
2
Q
study of the economy as a whole or economic aggregate
A
Macroeconomics
3
Q
study of small economics units such as individuals, firms, or markets
A
Microeconomics
4
Q
Based on facts, avoids value judgements (what is)
A
Positive statements
5
Q
Includes value judgements (what ought to be)
A
Normative statements
6
Q
Making decisions based on increments
A
Marginal analysis
7
Q
All the alternatives that we give up when we make a choice
A
Trade off
8
Q
Most desirable alternative given up when you make a choice
A
Opportunity cost
9
Q
Satisfaction
A
Utility
10
Q
Marginal
A
Marginal
11
Q
Distribute
A
Allocate
12
Q
created for direct consumption
A
consumer goods
13
Q
goods used to make consumed goods
A
Capital goods
14
Q
Human made resource used to create other goods and services
A
Physical capital
15
Q
Skills or knowledge gained by a worker through education and experience
A
Human capital
16
Q
Measure of efficiency that shows the number of outputs per unit input
A
Productivity
17
Q
Resources easily adaptable for producing either goods, straight line PPC
A
Constant opportunity cost
18
Q
Producing more of one good increases the resource cost of the other good, bowed PPC
A
Law of increasing opportunity cost
19
Q
Producer that can produce the most output or requires the least amount of inputs
A
Absolute advantage
20
Q
Producers with the lowest opportunity cost
A
Comparative advantage
21
Q
Agreed upon conditions that would benefit both countries
A
Terms of trade
22
Q
Different quantities of goods that consumers are willing and able to buy at different prices
A
Demand
23
Q
Inverse relationship between price and quantity demanded
A
Law of Demand
24
Q
If price goes up for a product, that produce will be bought less and more of a similar product will be bought
A
Substitution effect
25
If the price goes down for a product, the purchasing power increases for consumers allowing them to purchase more
Income effect
26
The more you consume anything, the additional satisfaction you receive will start to decrease
Law of diminishing marginal utility
27
All other things held constant
Ceteris Paribus
28
Goods used in place of another one
Substitutes
29
Two goods that are bought and used together
Complements
30
As income increases, demand increases or as income falls, demand falls
Normal goods
31
As income increases, demand falls or as income falls, demand increases
Inferior goods
32
Different quantities of a good that sellers are willing and able to sell at different prices
Supply
33
Direct relationship between price & quantity supplied, as price increases, quantity produced increases and as price falls, quantity produced falls
Law of supply
34
Payment a government makes to a business or market to increase supply
Subsidy
35
Ambiguous
Indeterminate
36
Max legal price a seller can charge for a product, shortage
Price ceiling
37
Minimum legal price a seller can sell a product, surplus
Price floor
38
Production Possibilities Curve shifters
1.) Change in resource quantity or quality
2.) Change in technology
3.) Change in trade
39
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
40
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
41
Part of the economy run by individuals and businesses
Private sector
42
Part of the economy that is controlled by the government
Public sector
43
Payment for the factors of production like rent, wages, interest, and profit
Factor payments
44
When the government redistributes income like welfare or social welfare
Transfer payments
45
Government payments to businesses to increase supply
Subsidies
46
Dollar value of all final new goods and services produced within a country in one year
Gross domestic product (GDP)
47
GDP divided by population/per person
GDP per capita
48
Goods inside final goods that don't count towards GDP
Intermediate goods
49
Goods that don't wear out quickly and last over a long period of time
Durable goods
50
Goods that have a short life cycle
Nondurable goods
51
Workers that are actively looking for a job but aren't working
Unemployment
52
Unemployment that is temporary or being between jobs and the person has transferable skills
Frictional unemployment
53
Unemployment based on time of year or nature of the job
Seasonal unemployment
54
Changes in the labor force that make some skills obsolete
Structural unemployment
55
Unemployment where automation and machinery replace workers
Technological unemployment
56
Unemployment caused by recession
Cyclical unemployment
57
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)
58
Focuses on Inflation and not having too little unemployment
Non-Accelerating Inflation Rate of Unemployment (NAIRU)
59
Some people are no longer looking for a job because they have given up
Discouraged workers
60
Someone who wants more hours and can't get them but are still considered employed
Underemployed workers
61
Rising general level of prices and reduces purchasing power of money
Inflation
62
Decrease in general prices and causes people to hoard money
Deflation
63
Prices increasing at slower rates
Disinflation
64
Wage measured by dollars rather than purchasing power
Nominal wage
65
Wage adjusted for inflation
Real wage
66
GDP measured in current prices and doesn't account for inflation from year to year
Nominal GDP
67
GDP expressed in constant or unchanging dollars and adjusts for inflation
Real GDP
68
Shifters of Aggregate Demand
1.) Change in Consumer spending
2.) Change in Investment spending
3.) Change in Government spending
4.) Change in Net Exports
69
Shifters of Aggregate Supply
1.) Change in Resource prices
2.) Change in Actions of the Government
3.) Change in Productivity
70
Shifters of the Long Run Aggregate Supply
1.) Change in resource quantity or quality
2.) Change in technology
71
Added as together
Aggregate
72
All the goods and services that buyers ware willing and able to purchase at different price levels, real GDP
Aggregate demand AD
73
Higher price levels reduce the purchasing power of money and decreases quantity of expenditures and vice versa
Wealth effect/Real balance effect
74
For price level increases, lenders need to charge higher interest rate to get a real return on loans, high interest rates discourage consumers and investing
Interest rate effect
75
When your price level rises, exports fall and imports rise causing real GDP to fall
Foreign trade effect
76
Initial change in spending will set off a magnified, spending chain
Multiplier effect
77
How much people consumer rather than save when there is a change in disposable income, expressed as a fraction/decimal
Marginal Propensity to Consume MPC
78
How much people save rather than consume when there is a change in disposable income, expressed as a fraction/decimal
Marginal Propensity to Save MPS
79
Amount of goods and services (real GDP) that firms will produce in an economy at different price levels
Aggregate supply AS
80
Wages & resources prices are sticky & won't change as price level changes
Short-run aggregate supply SRAS
81
Wages & resource prices are flexible & will change as price level changes
Long-run aggregate supply LRAS
82
Stagnant economy + inflation causes a recessionary gap
Stagflation
83
Demand pulls up prices and causes aggregate demand to increase
Demand-pull inflation
84
Higher production costs increase prices causing SRAS to decrease
Cost-push inflation
85
Amount consumers will spend regardless of income to pay for necessities
Autonomous consumption
86
Income after taxes
Disposable income
87
Negative savings
Dissaving
88
Actions by Congress to stabilize the economy
Fiscal policy
89
Actions by the Federal Reserve Bank to stabilize the economy
Monetary policy
90
New bill to change AD through government spending or taxation but lags
Discretionary fiscal policy
91
Permanent spending or taxation laws to work counter cyclically to stabilize the economy
Non-discretionary fiscal policy/automatic stabilizers
92
Laws that reduce inflation and decrease GDP by decreasing government spending and increases taxes to close an inflationary gap
Contractionary fiscal policy
93
Laws that reduce unemployment and increase GDP by increasing government spending and decreasing taxes to close a recessionary gap
Expansionary fiscal policy
94
Above or beyond full employment
Inflationary gap/positive output gap
95
Below or less than full employment
Recessionary gap/negative output gap
96
Network of institutions that link borrowers and lenders
Financial Sector
97
Anything tangible or intangible has value
Asset
98
Amount a lender charges a borrower for borrowing money
Interest Rate
99
Asset that earned interest over time like bonds
Interest-bearing assets
100
Ease with which an asset can be converted into a medium of exchange/money
Liquidity
101
Loans or IOUs that represent debt by governments, businesses or individuals that must be repaid to the lender
Bonds
102
Represent ownership of a corporation and the owner is often entitled to a portion of the profit paid out as dividends
Stocks
103
Percentage increase in purchasing power that a borrower pays that is adjusted for inflation
Real interest rate
104
Percentage increase in money that the borrower pays that is not adjusted for inflation
Nominal interest rate
105
Current worth of some future amount of money
Present value
106
Anything generally accepted as payment for goods and services
Money
107
Total collection of assets
Wealth
108
Flow of earnings per unit of time
Income
109
Something that performs the function of money and has intrinsic value like gold or cigarettes
Commodity money
110
Something that serves as money but has no other value or use like paper money
Fiat money
111
The amount of goods and services a unit of money can buy
Purchasing power
112
Bank holds a portion of deposits for withdrawals and loans out the rest
Fractional reserve banking
113
Money deposited in a commercial bank
Demand deposits
114
Percent that banks must hold by law
Required reserves
115
Amount that the bank can loan out
Excess reserves
116
A record of a bank's assets, liabilities, and net worth
Balance sheet
117
People hold money for everyday transactions
Transaction demand for money
118
People hold money since it is less risky than other assets
Asset demand for money
119
Nonpartisan government office that adjusts the money supply to influence the economy
Federal Reserve System/Board of the Fed
120
The interest rate that the Fed charges commercial banks
Discount rate
121
When the Fed buys or sells government bonds to affect money supply
Open market operations
122
Interest rate that banks charge one another for one-day loans of reserves
Federal funds rate
123
Shows supply and demand of loans and the equilibrium real interest rate
Loanable funds market
124
Amount that households save instead of consume
Private saving
125
Amount that the government saves instead of spends
Public saving
126
Public saving + private saving
National saving
127
Amount of money entering the country
Capital inflow
128
Amount of money leaving the country
Capital outflow
129
Capital inflow - capital outflow
Net capital inflow
130
Borrowing by businesses and consumers
Private investment
131
Deficit spending when government spending is greater than tax revenue
Government investment
132
Shifters of Money Demand
1. Change in Price level
2. Change in Income
3. Change in technology
133
Shifters of Money Supply
1. Reserve requirement/ratio (Limited)
2. Discount rate (Limited)
3. Open Market Operations (Limited)
4. Interest on Reserves (Ample)
134
Shows the tradeoff between inflation and unemployment
Philips Curve
135
Overheating economy means low unemployment and high inflation, recession means high unemployment and low inflation
Short Run Philips Curve
136
No tradeoff between inflation and unemployment, represents Natural Rate of Unemployment
Long Run Philips Curve
137
Average times a dollar is spent and respent in a year
Velocity of Money
138
When annual government spending and transfer payments are greater than tax revenue
Budget surplus
139
Federal program that requires payments to eligible people or units of governments like Social Security
Entitlements
140
Adverse effect of government borrowing on interest-sensitive private sector spending
Crowding out
141
Change in real GDP per capita over time
Growth rate
142
Government policies designed to increase production by reducing business taxes and/or regulations
Supply side fiscal policy
143
Exporting more than is imported
Trade surplus
144
Exporting less than is imported
Trade deficit
144
Summary of a country's international trade prepared in domestic currency
Balance of payments (BOP)
145
Made up of net exports, investment income, and net transfers
Current Account (CA)
146
Income from the factor of production including payments to foreign investors
Investment income
147
Money flows from the private and public sectors
Net transfers
148
Measures the purchase and sales of financial assets abroad and purchases of things that continue to earn money
Capital and Financial Amount (CFA)
149
Foreign company buys businesses in a different country
Foreign Direct Investment
150
Difference between the purchase of foreign assets and domestic assets purchased by foreigners
Net Capital Outflow
151
Price of currency relative to another currency
Exchange rate
152
Loss of value of a country's currency compared to a foreign currency
Depreciation
153
Increase of value of a country's currency compared to a foreign currency
Appreciation
154
Government actively manages the country's currency
Fixed exchange rate
155
Market determines the value if the country's currency
Floating exchange rate
156
Loanable Funds Market Demand Shifters
Demand comes from borrowers/investors
1. Changes in borrowing by consumers
2. Changes in borrowing by businesses (investment spending)
3. Changes in borrowing by the government (ex. deficit spending)
157
Supply Shifters
Supply comes from lenders/savers
1. Changes in private savings behavior
2. Changes in public savings
3. Changes in foreign investment
158
Short Run Phillips Curve Point Move (Mirrors AS/AD graph)
1. Aggregate demand shifts
159
Short Run Phillips Curve Line Shift (Mirrors AS/AD graph)
2. Aggregate supply shifts
160
FOREX Shifters
1. Change in tastes
2. Change in relative income
3. Change in relative price level
4. Change on relative interest rates
