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12th grade study > Macro Final Exam > Flashcards

Macro Final Exam Flashcards

(84 cards)

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1
Q

When does long run aggregate supply NOT change?

A

it does NOT change when the price level decreases

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2
Q

absolute advantage

A

who makes the most stuff (no math required)

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3
Q

when demand increases…

A

price increases, quantity increases

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4
Q

when supply increases…

A

price decreases, quantity increases

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5
Q

infrastructure

A

the “underlying structure” of a country and its economy; strutures that support a country’s economy

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6
Q

Expansionary fiscal policy

A

aims yo stimulate economic growth by increasing the money supply, boosts economic activity by keeping interest rates low; it increases economic activity

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7
Q

Contractionary monetary policy

A

monetary measure to reduce government spending/the rate of monetary expansion by the central bank

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8
Q

economics

A

the study of how people manage resources, how choices are made and how limited resources are allocated.

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9
Q

opportunity cost

A

what you give up when you choose one thing over another, ex: giving up spending time with friends to study… cost = missing time with friends

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10
Q

production possibility curve (PPC)

A

a graph that displays all the possible combinations of two goods or services that can be produced when all resources are fully and efficiently used.

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11
Q

trade-offs

A

to make more of one thing… you have to make less of another

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12
Q

efficiency on a graph means

A

efficiency on a graph are points on the curve, this means resources are being utilized and improving production

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13
Q

inefficiency on a graph means

A

points are inside the curve, means that resources are not being utilized optimally

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14
Q

how do we calculate opportunity cost?

A

what you give up/what you gain ; you calculate how much of one good you lose to gain more of the other good (10/5=2)

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15
Q

comparative advantage

A

a person, company, or country, can produce something at a lower opportunity cost than someone else. it’s about who gives up LESS to make that good

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16
Q

what does comparative advantage tell us?

A

it tells us who should specialize in what

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17
Q

marginal cost

A

the extra cost of producing or doing one more unit of something

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18
Q

how do we calculate marginal cost?

A

charge in total cost/change in quantity ; look at how much increases when you produce one mor unit and divide it by the numbe of extra units

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19
Q

change in quantity demanded happens because…

A

happens because of a change in price of a good; moves along the demand curve (EX: price of coffee drops, you buy more coffee —> you move along the curve)

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20
Q

change in demand happens because…

A

happens because of something other than price, like a change in income, change in tastesm etc… the WHOLE demand curve shifts left or right (EX: everyone wants matcha instead of coffee —> the demand for coffee decreases, the curve shifts left)

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21
Q

price change on a graph

A

means a change in quantity demanded (move along curve)

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22
Q

price isn’t changing on a graph but other things are…

A

means a change in demand (shift curves)

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23
Q

prices changes –> movement along the curve leads to…

A

change in quantity demanded

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24
Q

factors other than price change –> curve shifts lead to…

A

change in demand

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25
if the price of ice cream drops down, people buy more ice cream... thats a ?
thats a change in quantity demand
26
if people start to like ice cream more, they want ice cream no matter what price... thats a?
thats a change in demand, the demand curve shifts to the right
27
inferior goods
goods where demand decreases when people's incomes rise (ramen noodles, generic brands) so.. income up = demand down for inferior goods
28
normal goods
goods where demand goes up when people's income rises (iphones, resturants, clothing brands) so.. income up = demand up for normal goods
29
unemployment rate
the percentage of the labor force that is actively looking for work but cannot find a job
30
unemployment rate formula...
UR = unemployment/labor force x 100%
31
labor force
people working & the people actively looking for work
32
frictional unemployment
short term unemployment when people are between jobs or just enerting the labor market; EX: recent graduate looking for their first job
33
structural unemployment
when a mismatch between workers' skills and job requirements or jobs disappear due to technology or changes in the economy; EX: factory workers losing jobs because of new machines/innovations
34
cyclical unemployment
unemployement caused by economic downturns or recessions ---> when demands for goods and services drop, so do jobs... EX: layoffs during a recession
35
recession
when the economy shrinks or grows at a slower rate for a period of time (two quarters consecutively/6 months or more)
36
gross domestic product (GDP)
the total value of all goods and services with a country in a specific time period (typically a year or a quarter); it measures the size and health of a country's economy
37
GDP measures what?
GDP measures market value (the price people pay), GDP counts only final goods and services, measures production within the country
38
nominal GDP
the total value of goods and services produced measured by using current prices during the year they were produced; if prices go up but the actual amount of stuff produced stays the same, nomial GDP will go up
39
nominal GDP
current prices, includes inflation effects
40
real GDP
constant prices, strips out inflation to show real growth
41
real GDP
the total value of goods and services produced in production, seperating out the effect of price changes
42
circular flow model of the economy displays:
shows how money, goods, and services f;pw neyween different parts of the economy; connects households (consumers), firms (businesses/producers)
43
product market
where goods and services are bought and sold
44
factor market
where labor, land, and capital are exchanged
45
capital
capital is anything made to help people produce something else
46
inflation
when the general level of prices rises over time, meaning your money buys less than before
47
who does inflation hurt?
inflation hurts those on fixed incomes (their income stay the same, but prices don't), savers (money loses value), lenders (loaning money becomes less because inflation)
48
who does inflation benefit?
inflation may benefit borrowers, businesss with flexible prices, owners of real assets like houses or lands (house values may go up)
49
aggregate demand (AD)
the total demand for all goods and services in an economy at different price levels (slopes downward: when prices go up, total spending goes down)
50
aggregate supply (AS)
represents the total quantity of goods and services that producers are willing and able to supply at various price levels within an economy
51
the multiplier effect
when one person's spending becomes another person's income, it creates a chain reaction ---> total economic impact is bigger than the inital change
52
spending multiplier
1/1-MPC ; it shows how much total GDP changes from an inital change in spending
53
tax multipler
-MPC x spending multiplier
54
MPC
marginal propensity to change
55
higher MPC = ?
higher MPC = bigger multiplier effect
56
more spending/tax cuts leads to...
more spending/tax cuts leads to... larger total change in GDP!!
57
The Fed (federal reserve)
controls money supply, interest rates, and helps keep the economy stable
58
dual mandate
the Fed balances between avoiding high inflation and avoiding high unemployment by keeping prices stable (controls inflation and maximizes employement)
59
the target inflation rate is...
the target inflation rate is 2% per year
60
monetary policy
what the Fed does to influence money supply and interest rates
61
open market operation (OMO)
The Fed buys or sells government bonds to adjust the money in the economy
62
Fiscal policy
government decisions ahout spending and taxes, raises or lowers taxes
63
fiscal means...?
government taxes/spending
64
monetary means...?
central bank money/interest rates
65
discount rate
the interest rate that the Fed charges banks when they borrow directly from the Fed
66
Federal funds rate
the interest rate banks charge each other for overnight loans
67
interest rates effects on consumption means...?
when interest rates go down, people spend more; when interest rates rise, people spend less
68
interest rates effects on investment...?
lower rates mean businesses borrow more for investing in equipments; higher rates mean businesses borrow less and cut back on investment
69
interest rates on aggregate demand...?
lower rates mean increase in aggregate demand (more consumption and investment); higher rates mean decrease in aggregate demand (less spending and investment)
70
what does C, I, G, X, M, stand for in GDP?
C = consumption (household spending), I = investment (business spending on capital goods, like machinery), G = government spending (on goods and services), X = exports, M = imports
71
per capita
per person, the total amount of GDP is divided by the number of people in the population.
72
what does NOT add to GDP
imports because they represent spending on foreign-produced goods, which don’t count toward domestic production. Buying and selling stocks and bonds do NOT count toward GDP.
73
what DOES add to GDP?
consumption, investment, government spending, exports; basically all spending on domestically produced goods and services by households, businesses, government, and foreign buyers (exports)
74
stagflation
refers to a period of slow economic growth (stagnation) combined with high inflation and high unemployment
75
Short-Run Aggregate Supply (SRAS)
How much stuff businesses want to make when prices can change but some costs (like wages) stay the same for now. Higher costs shift SRAS left (less supply), lower costs shift it right (more supply).
76
Long-Run Aggregate Supply (LRAS)
The most stuff the economy can make when everything (prices and wages) has had time to adjust. The economy’s capacity changes — more workers, better technology, more capital → shifts LRAS right (growth). Destruction of capital or loss of labor → shifts LRAS left (shrinking economy).
77
Aggregate Demand (AD)
How much stuff everyone (people, businesses, government, other countries) wants to buy at different prices. For example, tax cuts or increased government spending shift AD right (more demand). Higher interest rates or lower consumer confidence shift AD left (less demand).
78
output
Output = total goods and services produced (real GDP).
79
more spending equals...
more demand, the AD curve shifts right
80
the equillibrium point
The equilibrium point is where aggregate demand equals aggregate supply, setting the economy’s overall price level and total output (real GDP).
81
overall price level means...
Overall price level means the average price of all goods and services in the economy — not just one product, but the general level of prices
82
CPI (Consumer Price Index)
measures the average price change over time of a basket of goods and services that households buy (like food, rent, gas).
83
GDP deflator
measures the overall price level of all goods and services produced in the economy (not just what households buy). It’s called the GDP deflator because it’s used to “deflate” nominal GDP (which includes price changes) to get real GDP (which shows only actual output, without the effect of inflation).
84
net exports
the overall amount of money a country makes through trade after subtracting everything it imports from everything it exports. In other words, net exports are defined as the difference between a country's total exports and its total imports.

12th grade study (5 decks)

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