AP Macro Final Review Flashcards

6941491907	medium of exchange	usable for buying and selling goods and services.	0
6941493005	transaction demand	demand for money as a medium of exchange.	1
6941493006	monetary policy	Deliberate changes in the money supply by the Fed to influence interest rates and thus the total level of spending in the economy.	2
6941494553	commodity money	commodity that has intrinsic value	3
6941494554	asset demand	demand for money as a store of value.	4
6941496150	reserve ratio	amount commercial banks must keep on hand and not lend out.	5
6941496151	fiat money	anything that is money because the government has decreed it to be money.	6
6941497072	FOMC	the 12-member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities.	7
6941497073	tight money	policy of increasing interest rates to reduce borrowing and spending, which will decrease expansion of aggregate demand and hold down price-level increases.	8
6941498071	easy money	policy of lowering interest rates by the Fed to increase aggregate demand and expand read GDP.	9
6941498072	Board of Governors	seven-member group that supervises and controls the money and banking system of the U.S.	10
6941499140	demand deposits	financial account with funds that can be withdrawn at any time; same as a checking account.	11
6941500220	intrinsic value	the market value of the metal within a coin.	12
6941500221	time deposits	an interest-earning deposit in a bank.	13
6941501816	excess reserves	the amount by which a bank's actual reserves exceed its required reserves.	14
6941501817	federal funds rate	the interest rate banks charge one another on overnight loans made out of their excess reserves.	15
6941503176	legal tender	means that paper money is a vaild and legal means of payment of any debt that was contracted in dollars.	16
6941504437	classical theory	argument that the economy would automatically self-adjust after deviations from the norm occur and return to full-employment levels.	17
6941504438	Keynesian theory	argument that government should play an active role stabilizing the economy.	18
6941505474	productivity	a measure of average output per unit of input.	19
6941505475	efficiency wages	wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.	20
6941506738	budget surplus	amount by which the revenues of the Federal government exceed its expenditures in any year.	21
6941506739	budget deficit	amount by which the expenditures of the Federal government exceed its revenues in any year.	22
6941507769	crowding out effect	rise in interest rates caused by the Federal government's increased borrowing to finance budget deficits.	23
6941507770	recessionary gap	the amount the aggregate demand must shift upward to increase the GDP to its full-employment level.	24
6941509015	inflationary gap	the amount the aggregate demand must shift downward to decrease the GDP to its full-employment level.	25
6941510341	contractionary fiscal policy	a decrease in government spending, an increase in net taxes, or some combination of the two, for the purpose of decreasing aggregate demand and thus controlling inflation.	26
6941511672	expansionary fiscal policy	in increase in government spending, a decrease in net taxes, or some combination of the two, for the purpose of increasing aggregate demand and thus expanding real output.	27
6941511673	normal good	products whose demand varies directly with money income.	28
6941512598	inferior good	products whose demand varies inversely with money income.	29
6941513572	substitution effect	at a lower price, buyers have the incentive to substitute what is now a less expensive product for other products that are now relatively more expensive.	30
6941514968	law of diminishing marginal utility	in any specific time period, a buyer of a product will derive less satisfaction from each successive unit of the product consumed.	31
6941516012	substitute good	good that can be used in place of another good.	32
6941516013	complementary good	good that is used together with another good.	33
6941517339	income effect	a lower price increases the purchasing power of a buyer's income.	34
6941517340	absolute advantage	can produce more output of that product from any given amount of resource inputs than can any other producer.	35
6941518695	comparative advantage	can produce the product at a lower opportunity cost than another producer.	36
6941518696	specialization	using the resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services.	37
6941520178	product market	place where goods and services produced by businesses are bought and sold.	38
6941520179	resource market	place in which households sell their resources to businesses.	39
6941521497	land	natural resources used in the production process.	40
6941521498	labor	physical actions and mental activities that people contribute to the production of goods and services.	41
6941521499	capital	all manufactured aids used in producing consumer goods and services.	42
6941522547	entrepreneurial ability	the human resource that takes the initiative in combining the resources of land, labor, and capital to produce a good or service.	43
6941522548	economics	social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.	44
6941524855	surplus	excess supply	45
6941524856	shortage	excess demand	46
6941525735	market system	economic system characterized by the private ownership of resources.	47
6941525736	command system	economic system characterized by government ownership of resources.	48
6941526713	equilibrium	neither a shortage or a surpus	49