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Flashcards in Unit 3 Deck (80)
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1

Aggregate price level

Measure of the overall level of prices in an economy

2

Price basket

A hypothetical set of consumer purchases of goods and services

3

Price index

The cost of purchasing a given Market Basket in a given year

4

Formula for price index of a market basket

Price of MB in given year/ price of MB in base year

5

Inflation rate

Price index 2- price index 1/price index 1

6

Consumer price index (CPI)

Measures the cost of the Market Basket on a typical Urban family

7

Why inflation isn't too accurate

When you pay more over time you get more.
People change what they buy based on tastes

8

Producer price index

Measures the price of goods and services purchased by producers

9

GDP deflator

100x nominal GDP /real GDP

10

Causes of inflation

Demand pull, cost push, gov printing money

11

Aggregate demand curve

Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households

12

Shifters of aggregate demand

C (consumer spending)
I (investment spending)
G (gov spending)
X (net exports)

13

The wealth effect

The change in consumer spending caused by the altering purchasing power of consumer assets

14

Interest rate effect

A change in investment and consumer spending caused by altered interest rates that result from changes in the demand

15

Changes in expectation

Firm space investment spending on what they will make

16

Changes in wealth

When the real value of housing rises so does purchasing power

17

Fiscal policy

Do use of government intervention to stabilize the economy

18

Low tax means high

Disposable income

19

High tax means Low

disposable income

20

Monetary policy

Central banks way of changing the quantity of money or the interest rate to stabilize the economy

21

Wealth effect modern definition

When people have a higher purchasing power they spend more that's shifting aggregate demand to the right

22

Foreign trade effect

When price level rises foreign buyers by fever goods

23

Aggregate supply curve

Shows the relationship between the aggregate price level and the quantity of aggregate output supplied

24

Nominal wage

Dollar amount of a wage paid

25

Sticky wages

Nominal wages are slow to fall in the face of high unemployment and slow to rise in the face of labor shortages

26

Shifters of agregate supply

P (productivity)
E (expectations)
A (actions of the government)
R (Resources)

27

Demand shock

An event which shifts the demand curve

28

Changes in commodity prices

When a resource costs more aggregate supply decreases

29

Changes in nominal wages

If wages increase aggregate supply decreases, because it is an input for the supplier

30

Changes in productivity

The worker can make something more efficiently this shifts the supply curve to the right