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AP ECON > Midterm Exam Review > Flashcards

Midterm Exam Review Flashcards

(81 cards)

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1
Q

microeconomics

A

focuses on individual parts of the economy, how households, and firms make decisions

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2
Q

macroeconomics

A

looks at the economy as a whole, inflation, unemployment, economic growth etc.

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3
Q

positive economics

A

describes the world as it is

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4
Q

negative normatives

A

describes how the world should be

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5
Q

Econ principles 1

A

everything has a cost

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6
Q

scarcity

A

society has limited resources and unlimited wants

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7
Q

tradeoff

A

efficiency vs. equity

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8
Q

equity benefits

A

benefits of those resources are distributed fairly among members of society

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9
Q

“pure” economic systems

A

Market, command, traditional

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10
Q

“mixed” economic sysmes

A

capitalism, democratic socialism, authoritarian socialism(communism)

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11
Q

marginal costs

A

decision to choose one alternative over another occurs when that alternatives marginal benefits exceed its marginal costs

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12
Q

concepts illustrated by the PPC curve

A

efficiency, trade offs, opportunity cost, economic growth

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13
Q

law of demand

A

when everything else held constant as price increases the quantity demanded of a good decreases

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14
Q

law of supply

A

other things equal, quantity supplied of a good rises, when the price of the good rises

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15
Q

determinants of supply

A 
Prices of substitutes and complements
Input price
Number of sellers
Technology
Expectation of producers
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16
Q

income effect

A

lower price = consumer buys more goods given a fixed income, higher price mean the opposite

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17
Q

substitution effect

A

higher price causes consumers to buy relatively less expensive alternatives

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18
Q

determinants of demand

A 
Price of related goods
Income of consumers
Number of consumers
Tastes and preferences
Expectation of buyers
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19
Q

substitutes

A

when the fall in the price of one good reduces demand for another goo

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20
Q

complements

A

when a fall in the price of one good increases the demand for another good

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21
Q

price ceiling

A

legal maximum on which prices at which a good can be sold

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22
Q

price floor

A

legal minimum on which prices at whihc a good can be sold

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23
Q

3 basic economic question

A

what to produce?
how to produce?
for whom to produce?(allocation)

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24
Q

gdp

A

y=C + I G +NX

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25
CPI
measure of the averagechange in prices | paid by urban consumers for a market basket (inflation rate) normal inflation is 2-5%
26
PPI
measures changes in prices received by producers of commodities or finished goods before the products are sold , provides a clue to the future costs that consumers will pay
27
unemployment rate
number of unemployed people divided by the total labor force
28
index of leading economic factors
economist attempt to predict what will happen in the future
29
prime rate
interest rates banks charge their best commercial customers
30
nominal gdp
values production of goods and services at current prices
31
real gdp
values the production of of goods and services at constant prices
32
gdp deflator
is a measure of the price level calculated as the ratio of nominal gdp to real grp times 100
33
GDP deflator equation
(nominal gdp/ real gdp) x 100
34
converting nominal gdp to real
(nominal gdp 20xx/gdp deflator 20xx) x 100 Nominal GDP current year x (price index base year/price index current year)
35
cyclical unemployment
year-year fluctuations in unemployment natural rate = 5%, associated with short term ups nd downs, busisness cycle
36
labor force
total number of workers including both employed and unemployed
37
employment
16 or older, working at a paying job
38
unemployed
laid off, actively looking for work, doesnt count dscouraged workers
39
frictional unemployment
unemployment that results from the time it takes to match workers with jobs
40
structural unemployment
mismatch in demand in the labor market
41
recession
2 consecutive quarters(6months) of negative gdp growth
42
spending multiplier
1/MPS
43
tax multiplier
-MCP/MPS
44
excess reserves
actual reserves-required reserves
45
reserve ratio
1/required reserves
46
change in money supply
excess reserves x money multiplier
47
required reserve
Demand deposit x required reserve ratio
48
money multiplier
1/required reserve ratio
49
determinants of money demand
transaction demands precautionary demands speculative demand
50
determinants of demand for loanable funds
``` business expectations consumer expectations govt. budget plans consumer incomes consumer indebtedness ```
51
budget defecit
govt spends more than it receives so then it shifts right the demand for loanable funds which increases interest rate and reduces investment called crowding out
52
monetary policy
buy lower lower sell raise raise issued buy the FED
53
discount rate
interst rate the fed charges banks for loans
54
Federal funds rate
the rate banks charge each other for loans
55
currency is good
``` Durability Uniformatlit Accessible Portable Stability in value ```
56
medium of exchange
an item that buyers give to sellers when they want to purchase goods/services
57
unit of account
yard stick people use to post prices and record debts
58
store of value
an item that people can use to transfer purchasing power from present to future
59
commodity money
takes form of commodity with intrinsic value ex gold, silver
60
fiat money
used as money becasue of govt decree has no value, ex. coins, currency,
61
currency
paper bills and coins in the hands of the public
62
demand deposits(checking accounts)
balances in bank accounts that depositors can access on demand by writing a check
63
M1
coins and currency and checking accounts
64
M2
coins currency and checking accounts and near-monies, savings deposits (money market deposit account), smaller time deposits (<100,000), money market mutual funds
65
M3
M2 + Jumbo cds >100,000
66
present value formula/future
PV=FV/(1+r)^n | FV=PV x (1+r)^n
67
quantity theory of money
MV=PQ
68
misery index
unemployment rate + inflation
69
rational expectations theory
An economic idea that the people in the economy make choices based on their rational outlook, available information and past experiences. The theory suggests that the current expectations in the economy are equivalent to what the future state of the economy will be. This contrasts the idea that government policy influences the decisions of people in the economy.
70
real balance effect(wealth effect)
decrease in the real purchasing power of cash balances as the price level increases
71
interest-rate effect
as price level increase interest rates tend to increase which will decrease investment called crowding out
72
the exchange-rate effect
as price level increase domestic goods are more expensive to foreigners and foreign goods are cheaper to domestic which will reduce exports and increase imports domestically
73
mpc
change in consumption/change in disposable income | mpc+mps =1
74
mps
change in savings/change in disposable income | mpc+mps = 1
75
govt spening multiplier
1/mps
76
tax multiplier
-mpc/mps
77
leakage
non consumption use of income, savings, taxes, imports
78
injection
non consumption expenditures on productin
79
stick-wage theory
nominal wages are slow to adjust
80
sticky-price theory
prices of some goods and services adjust sluggishly in response to changing economic conditions
81
misperceptions theory
changes in the overall price level temporarily mislead suppliers about what is happening in that particular markets in which they sell their output

AP ECON (5 decks)

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