AP Macroeconomics Flashcards

6681812649	absolute advantage	the ability to produce something more efficiently	0
6681812650	capital	productive equipment or machinery	1
6681812651	comparative advantage	the ability to produce something with a lower opportunity cost	2
6681812652	economics	a social science that studies how resources are used and is often concerned with how resources can be used to their fullest potential	3
6681812653	efficiency	using resources to their maximum potential	4
6681812654	labor	all human activity that is productive	5
6681812655	land	all natural resources	6
6681812656	law of Increasing costs	law that states that when more of a product is initially being produced, the higher the opportunity cost will be to produce still more	7
6681812657	macroeconomics	economic problems encountered by the nation as a whole	8
6681812658	microeconomics	economic problems faced by individual units within the overall company	9
6681812659	opportunity cost	the amount of one good that must be sacrificed to obtain an alternative good	10
6681812660	positive economics	economic analysis that draws conclusions based on logical deduction or induction (value judgements are avoided)	11
6681812661	production possibilities curve	the combinations of two goods that can be produced if the economy uses all of its resources fully and efficiently	12
6681812662	normative economies	economies involving value judgement	13
6681812663	resource	anything that can be used to produce a good or service	14
6681812664	allocative efficiency	term for resources being deployed to produce just the right amount of each product to satisfy society's wants	15
6681812665	capitalism	an economic system where supply and demand determine prices	16
6681812666	circular flow diagram	diagram that shows how households and firms are related by the exchange of resources and products	17
6681812667	command economy	economy in which the central government dictates what will or will not be produced and who gets what	18
6681812668	the law of demand	law that states that when the price of a product increases, the quantity demanded decreases, ceteris paribus	19
6681812669	law of supply	law that states that when the price of a product increases, the quantity supplied increases, ceterus paribus	20
6681812670	mixed economy	a blend of government commands and capitalism	21
6681812671	consumption expenditures	all the goods and services sold to households	22
6681812672	disposable personal income (DPI)	the income of households after taxes have been paid	23
6681812673	government expenditures	goods and services sold to governments	24
6681812674	gross domestic product (GDP)	dollar value of production within a nation's borders	25
6681812676	intermediate sales	sales to firms that will incorporate the item into their final product	26
6681812678	investment expenditures	expenditures by businesses on plants and equipment plus the change in business inventories	27
6681812679	national income (NI)	the income earned by households and profits earned by firms after subtracting depreciation and indirect business taxes	28
6681812681	net exports	exports minus imports	29
6681812682	personal income (PI)	income received by households	30
6681812683	real GDP	GDP adjusted for the price changes	31
6681812684	underground economy	all the illegal production of goods and services and legal production that does not pass through markets	32
6681812685	GDP	C+I+G+X	33
6681812686	GDP per capita	GDP/population	34
6681812687	consumer price index (CPI)	measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services	35
6681812688	cyclical unemployment	loss of jobs by individuals during a recession and the corresponding slowdown in production	36
6681812689	Fisher equation	Nominal Interest Rate= Real Interest Rate + Expected Inflation	37
6681812690	frictional unemployment	state of being out of work because the person is in between jobs	38
6681812691	GDP deflator or Price Index	measure of the level of prices in the economy	39
6681812693	inflation	a sustained rise in most prices in the economy	40
6681812697	structural unemployment	state of being out of work because the economy is structured, or set up, to a person's disadvantage	41
6681812698	unemployment rate	the number of unemployed persons divided by the labor force	42
6681812699	CPI	(Total Cost this Period/Total Cost Base Period) x 100	43
6681812700	Inflation rate	[(this period CPI-previous period CPI)/previous period CPI] x 100	44
6681812702	Real GDP	(GDP/GDP deflator) x 100	45
6681812703	Nominal Interest Rate	Real Interest Rate + Expected Inflation	46
6681812704	Unemployment Rate	Number of unemployed/civilian labor force	47
6681812705	aggregate demand	the demand for all goods and services by all households, business, governments, and foreigners	48
6681812706	aggregate supply	the supply of all goods and services by all producers in the economy	49
6681812708	business cycle	a wave of economic activity comprised of an expansion and a recession	50
6681812709	classical economic theory	the predominant paradigm in economic analysis from about 1800 until 1930, based on Say's Law	51
6681812711	equilibrium price level	the price level that equates aggregate supply and aggregate demand, the average level of prices in the economy	52
6681812712	equilibrium quantity	the amount of output that results in no shortage or surplus, the amount of goods and service bought and sold in the economy	53
6681812713	recovery	a sustained improvement in economic activity	54
6681812714	Keynesian theory	theory that opposes Classical theory by emphasizing the short run and focusing on economies that are operating below full capacity	55
6681812715	marginal propensity to consume (MPC)	idea that given an extra dollar, how much is spent?	56
6681812716	multiplier	an initial change in spending in the economy that will have a magnified, or multiplied, effect on income	57
6681812717	recession	a sustained decline in economic activity	58
6681812718	Say's Law	theory that supply creates its own demand	59
6681812719	MPC	change in spending / change in income	60
6681812720	Spending Multiplier	1/MPS	61
6681812721	total change in income	Initial Change in Spending x Multiplier	62
6681812722	automatic stabilizers	government policies already in place that promote deficit spending during recessions and surplus budgets during expansions	63
6681812723	crowding out	the increase in interest rates and subsequent decline in spending that occurs when the government borrows money to finance a deficit	64
6681812724	deficit	situation that exists when government spending exceeds tax revenues	65
6681812725	fiscal policy	changes in government spending and taxes to fight recessions or inflations	66
6681812726	inflationary gap	what occurs when the equilibrium quantity of output is above potential output	67
6681812727	Phillips curve	the inverse relationship between inflation and unemployment	68
6681812728	rational expectations	the idea that households and businesses will make economic decisions that might offset intended policy goals	69
6681812729	recessionary gap	what occurs when the equilibrium quantity of output is below potential output	70
6681812730	stagflation	term used to describe the situation when the economy experiences inflation and a recession simultaneously	71
6681812731	surplus	spending by the government that is less than tax revenues	72
6681812732	change in real GDP	Initial Change in Spending x Multiplier	73
6681812734	currency	coins and paper money	74
6681812735	discount rate	the rate of interest the FED charges when it makes loans to depository institutions	75
6681812736	excess reserves	the amount of any deposit that does not have to be held aside and may be used to make loans and buy investments	76
6681812737	The Federal Reserve	the central bank of the United The United States	77
6681812738	fiat money	money that is not backed by any precious commodity	78
6681812740	liquidity	the ability to turn an asset into cash rapidly and without loss	79
6681812741	M1	currency, transaction accounts, and travelers' checks	80
6681812742	M2	M1 plus savings accounts, certificates of deposit, and other liquid assets	81
6681812743	money	anything that society generally accepts in payment for a good or service	82
6681812744	money multiplier	1/reserve requirement, the multiple by which the money supply will change because of a change in bank reserves	83
6681812745	open market operations	activities in which the FED buys and sells government securities in the secondary market	84
6681812746	required reserves	the amount of any deposit that must be held aside and not used to make loans or buy investment	85
6681812747	reserve requirement	the percentage of any deposit that must be held aside and not used to amke loans or buy investments	86
6681812751	money multiplier	1/ Reserve Requirement	87
6681812752	change in money supply	Money Multiplier x Change in Bank Reserves	88
6681812756	federal open market committee (FOMC)	a committee within the FED that designs and executes the particular of monetary policy	89
6681812757	monetarist	one who believes that changes in the money supply have a profound effect on the economy	90
6681812759	monetary policy	changes in the money supply to fight recessions or inflations	91
6681812761	velocity of money	describing the number of times the typical dollar of M1 or M2 is used to make purchases during a year	92
6681812762	equation of exchange	M x V = P x Q	93
6681812764	economic growth	growth of output usually measured by the percentage change in real GDP or real GDP per capita	94
6681812765	human capital	the skill and knowledge embodied in the labor force	95
6681812767	potential GDP	the amount that can be produced using resources fully and efficiently	96
6681812770	Rule of 70	years it takes a variable to double =70/the annual growth rate of the variable	97
6681812771	appreciation	the increase of the value of a currency in terms of another currency	98
6681812772	balance of payments	an accounting of the funds that flow in and out of a country comprised of the capital account and the current account	99
6681812773	balance of trade	a nation's exports minus its imports	100
6681812774	financial account	a portion of the balance of payments comprised of foreign purchases of US assets minus US purchases of foreign assets, plus the change in official reserves	101
6681812775	closed economy	a hypothetical economy with no foreign trade	102
6681812776	current account	a portion of the balance of payments comprised of the trade balance, net investment income, and net transfers	103
6681812777	depreciation	the decrease of the value of a currency in terms of another currency	104
6681812779	exchange rate	the value of one country's currency in terms of another's	105
6681812781	import quota	a limit on the amount of a product that can be imported	106
6681812782	import tariff	a tax on a specified import product	107
6681812788	official reserves	government's holdings of foreign currencies	108
6681812789	open economy	an economy with foreign trade	109
6681812790	trade deficit	excess of a nation's imports over its exports	110
6681812791	trade surplus	excess of a nation's exports of over its imports	111
6681812792	balance of payments	current account +capital account	112