economics

AP Macroeconomics Exam: Course Study Guide [ UNIT I ] What is economics? the systematic study of choice textbook definitions ? refer to the allocation of scarce resources in order to satisfy societal wants What is the basic problem of economics? scarcity scarcity is the problem in the world that humans invented economics in order to address ? scarcity CANNOT be solved, only addressed or accommodated ? scarcity is the state of affairs in the world where a finite amount of stuff exists to satisfy a virtually infinite amount of human wants ? [scarcity = wants > resources ] ? to be scarce, something must be both limited and desirable ? scarce ? scarcity Sometimes, definitions of economics incorporate the three basic questions of economics: What to make/produce?

Inflationary Gap: At Capacity, The difference between Planned Expenditure and Agg. Output (rise in price not met with rise in Y) Causes of Inflation: Demand Pull ? initiated by MD? Cost Push/Supply-Side ? caused by ?Costs and ?Supply Stagflation- Causes both Y? P? - BAD NEWS Expectations: Of price increases cause companies to collectively pre-empt by increasing prices causing the real price to rise Monetary/Fiscal: Expansionary monetary/Fiscal policy at capacity will also push up AD causing inflation Lags: Recognition, Implementation -much longer for Fiscal Policies, Response - time it takes for the economy to adjust after implementation- much longer for Monetary Policies)