AP macroeconomics Flashcards

9547833500	absolute advantage	the ability to produce something more efficiently	0
9547833501	capital	productive equipment or machinery	1
9547833502	comparative advantage	the ability to produce something with a lower opportunity cost	2
9547833503	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
9547833504	efficiency	using resources to their maximum potential	4
9547833505	labor	all human activity that is productive	5
9547833506	land	all natural resources	6
9547833507	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
9547833508	macroeconomics	economic problems encountered by the nation as a whole	8
9547833509	microeconomics	economic problems faced by individual units within the overall company	9
9547833510	opportunity cost	the amount of one good that must be sacrificed to obtain an alternative good	10
9547833511	positive economics	economic analysis that draws conclusions based on logical deduction or induction (value judgements are avoided)	11
9547833512	production possibilities frontier	the combinations of two goods that can be produced if the economy uses all of its resources fully and efficiently	12
9547833513	normative economies	economies involving value judgement	13
9547833514	resource	anything that can be used to produce a good or service	14
9547833515	allocative efficiency	term for resources being deployed to produce just the right amount of each product to satisfy society's wants	15
9547833516	capitalism	an economic system where supply and demand determine prices	16
9547833517	circular flow diagram	diagram that shows how households and firms are related by the exchange of resources and products	17
9547833518	command economy	economy in which the central government dictates what will or will not be produced and who gets what	18
9547833519	the law of demand	law that states that when the price of a product increases, the quantity demanded decreases, ceteris paribus	19
9547833520	law of supply	law that states that when the price of a product increases, the quantity supplied increases, ceterus paribus	20
9547833521	mixed economy	a blend of government commands and capitalism	21
9547833522	consumption expenditures	all the goods and services sold to households	22
9547833523	disposable personal income (DPI)	the income of households after taxes have been paid	23
9547833524	government expenditures	goods and services sold to governments	24
9547833525	gross domestic product (GDP)	dollar value of production within a nation's borders	25
9547833526	gross national product (GNP)	dollar value of production by a country's citizens	26
9547833527	intermediate sales	sales to firms that will incorporate the item into their final product	27
9547833528	investment sales	sales to firms that will incorporate the item into their final product	28
9547833529	investment expenditures	expenditures by businesses on plants and equipment plus the change in business inventories	29
9547833530	national income (NI)	the income earned by households and profits earned by firms after subtracting depreciation and indirect business taxes	30
9547833531	national income and product accounts (NIPA)	a comprehensive group of statistics that measures various aspects of the economy's performance	31
9547833532	net exports	exports minus imports	32
9547833533	personal income (PI)	income received by households	33
9547833534	real GDP	GDP adjusted for the price changes	34
9547833535	underground economy	all the illegal production of goods and services and legal production that does not pass through markets	35
9547833536	GDP	C+I+G+X	36
9547833537	GDP per capita	GDP/population	37
9547833538	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	38
9547833539	cyclical unemployment	loss of jobs by individuals during a recession and the corresponding slowdown in production	39
9547833540	fisher's hypothesis	Nominal Interest Rate= Real Interest Rate + Expected Inflation	40
9547833541	frictional unemployment	state of being out of work because the person is in between jobs	41
9547833542	GDP deflator	measure of the level of prices in the economy	42
9547833543	hidden unemployment	describing those who are able to work but who are not actively seeking employment because they are discouraged about their prospects for finding employment	43
9547833544	inflation	a sustained rise in most prices in the economy	44
9547833545	menu cost	the misallocation of resources because of inflation	45
9547833546	nonaccelerating inflation rate of unemployment	the full employment rate of unemployment; when employment falls below this rate, inflation accelerates	46
9547833547	seasonal unemployment	state of being out of work because of the time of year	47
9547833548	structural unemployment	state of being out of work because the economy is structured, or set up, to a person's disadvantage	48
9547833549	unemployment rate	the number of unemployed persons divided by the labor force	49
9547833550	CPI	(Total Cost this Period/Total Cost Base Period) x 100	50
9547833551	Inflation rate	[(this period CPI-previous period CPI)/previous period CPI] x 100	51
9547833552	GDP deflator	(GDP/Real GPD) x 100	52
9547833553	Real GDP	(GDP/GDP deflator) x 100	53
9547833554	Nominal Interest Rate	Real Interest Rate + Expected Inflation	54
9547833555	Unemployment Rate	Number of unemployed/civilian labor force	55
9547833556	aggregate demand	the demand for all goods and services by all households, business, governments, and foreigners	56
9547833557	aggregate supply	the supply of all goods and services by all producers in the economy	57
9547833558	break-even point	point where the consumption function crosses the 45 degree line and income equals spending so that saving is zero	58
9547833559	business cycle	a wave of economic activity comprised of an expansion and a recession	59
9547833560	classical economic theory	the predominant paradigm in economic analysis from about 1800 until 1930, based on Say's Law	60
9547833561	consumption theory	the relationship between consumer spending and income	61
9547833562	equilibrium price level	the price level that equates aggregate supply and aggregate demand, the average level of prices in the economy	62
9547833563	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	63
9547833564	expansion	a sustained improvement in economic activity	64
9547833565	Keynesian theory	theory that opposes Classical theory by emphasizing the short run and focusing on economies that are operating below full capacity	65
9547833566	marginal propensity to consume (MPC)	idea that given an extra dollar, how much is spent?	66
9547833567	multiplier	an initial change in spending in the economy that will have a magnified, or multiplied, effect on income	67
9547833568	recession	a sustained decline in economic activity	68
9547833569	Say's Law	theory that supply creates its own demand	69
9547833570	MPC	change in spending / change in income	70
9547833571	Multiplier	1/(1-MPC)	71
9547833572	total change in income	Initial Change in Spending x Multiplier	72
9547833573	automatic stabilizers	government policies already in place that promote deficit spending during recessions and surplus budgets during expansions	73
9547833574	crowding out	the increase in interest rates and subsequent decline in spending that occurs when the government borrows money to finance a deficit	74
9547833575	deficit	situation that exists when government spending exceeds tax revenues	75
9547833576	fiscal policy	changes in government spending and taxes to fight recessions or inflations	76
9547833577	inflationary gap	what occurs when the equilibrium quantity of output is above potential output	77
9547833578	Phillips tradeoff	the inverse relationship between inflation and unemployment	78
9547833579	rational expectations	the idea that households and businesses will use all the information available to them when making economic decision	79
9547833580	recessionary gap	what occurs when the equilibrium quantity of output is below potential output	80
9547833581	stagflation	term used to describe the situation when the economy experiences inflation and a recession simultaneously	81
9547833582	surplus	spending by the government that is less than tax revenues	82
9547833583	change in real GDP	Initial Change in Spending x Multiplier	83
9547833584	certificate of deposit	debt instrument that is similar to a savings account except the interest rate is slightly greater and the deposit cannot be drawn on without penalty	84
9547833585	currency	coins and paper money	85
9547833586	discount rate	the rate of interest the FED charges when it makes loans to depository institutions	86
9547833587	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	87
9547833588	federal reserves	the central bank of the United The United States	88
9547833589	fiat money	money that is not backed by any precious commodity	89
9547833590	government securities	IOUs that the government issues when it borrows money	90
9547833591	liquidity	the ability to turn an asset into cash rapidly and without loss	91
9547833592	M1	currency, transaction accounts, and travelers' checks	92
9547833593	M2	M1 plus savings accounts, certificates of deposit, and other liquid assets	93
9547833594	money	anything that society generally accepts in payment for a good or service	94
9547833595	money multiplier	1/reserve requirement, the multiple by which the money supply will change because of a change in bank reserves	95
9547833596	open market operations	activities in which the FED buys and sells government securities in the secondary market	96
9547833597	required reserves	the amount of any deposit that must be held aside and not used to make loans or buy investment	97
9547833598	reserve requirement	the percentage of any deposit that must be held aside and not used to amke loans or buy investments	98
9547833599	savings account	an account at a depository institution that earns interest while the funds are readily available but cannot be withdrawn with checks	99
9547833600	secondary market	place where government securities that have already been issued may be bought or sold	100
9547833601	transaction account	a checking account at a bank or a similar account at some other depository institution	101
9547833602	money multiplier	1/ Reserve Requirement	102
9547833603	change in money supply	Money Multiplier x Change in Bank Reserves	103
9547833604	board of governors	executive board of the FED that makes major monetary policy decisions	104
9547833605	demand management policy	monetary and fiscal policy	105
9547833606	equation of exchange	M x V = P x Q; the money supply times its velocity equals the price level times output	106
9547833607	federal open market committee (FOMC)	a committee within the FED that designs and executes the particular of monetary policy	107
9547833608	monetarist	one who believes that changes in the money supply have a profound effect on the economy	108
9547833609	monetary neutrality	policy in which a change in the money supply would result in a proportional change in prices while real variables, such as the unemployment rate, would be unaffected	109
9547833610	monetary policy	changes in the money supply to fight recessions or inflations	110
9547833611	money demand	the amount that households and firms want to hold in currency and deposits	111
9547833612	velocity of money	describing the number of times the typical dollar of M1 or M2 is used to make purchases during a year	112
9547833613	equation of exchange	M x V = P x Q	113
9547833614	capital productivity	the amount of output per unit of plant and equipment	114
9547833615	economic growth	growth of output usually measured by the percentage change in real GDP or real GDP per capita	115
9547833616	human capital	the skill and knowledge embodied in the labor force	116
9547833617	labor productivity	the amount of output per unit of labor	117
9547833618	potential GDP	the amount that can be produced using resources fully and efficiently	118
9547833619	productivity	output per unit of input	119
9547833620	total productivity	the amount of all inputs	120
9547833621	Rule of 70	years it takes a variable to double =70/the annual growth rate of the variable	121
9547833622	appreciation	the increase of the value of a currency in terms of another currency	122
9547833623	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	123
9547833624	balance of trade	a nation's exports minus its imports	124
9547833625	capital 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	125
9547833626	closed economy	a hypothetical economy with no foreign trade	126
9547833627	current account	a portion of the balance of payments comprised of the trade balance, net investment income, and net transfers	127
9547833628	depreciation	the decrease of the value of a currency in terms of another currency	128
9547833629	dumping	the practice or foreign producers selling a product in the domestic market for less than it cost to produce it	129
9547833630	exchange rate	the value of one country's currency in terms of another's	130
9547833631	gold standard	a unit of one currency that is equivalent to a stated amount of gold	131
9547833632	import quota	a limit on the amount of a product that can be imported	132
9547833633	import tariff	a tax on a specified import product	133
9547833634	infant industries	those industries that are just getting started, perhaps requiring trade restrictions	134
9547833635	intervention	situation in which a nation or group of nations uses their official reserves to supply or demand a currency in order to alter the exchange rate	135
9547833636	managed float	an exchange rate regime where supply and demand determine exchange rates with occasional intervention when warranted	136
9547833637	net investment income	amount US citizens earned as interest and dividends from abroad minus how much was paid to foreigners in interest and dividends	137
9547833638	net transfers	money our government and citizens send as gifts or aid to foreigners minus how much foreigners send to us in gifts and aid	138
9547833639	official reserves	government's holdings of foreign currencies	139
9547833640	open economy	an economy with foreign trade	140
9547833641	trade deficit	excess of a nation's imports over its exports	141
9547833642	trade surplus	excess of a nation's exports of over its imports	142
9547833643	balance of payments	current account +capital account	143