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ap macro final

QuestionAnswer
Macroeconomics emphasizes ______ the economy as a whole
microeconomics emphasizes _______ individual parts of the economy
key fundamental of all economics scarcity, opportunity cost, supply and demand
opportunity cost sacrifices, the real cost is what you have to give up
positive economics statement of facts
normative economics what should work
what happens to unemployment and aggregate output in a recession? unemployment goes up and aggregate output goes down
business cycle the alternation between economic upturns and downturns
peak when business activity reaches a temporary max
trough bottom of the recession period
What does the PPC show? the different combination of output that can be produced given current resources and technology
What does a curved PPC graph indicate? law of rising opportunity cost
what does a straight line PPC graph indicate? constant opportunity cost
law of demand the higher the price, the lower demand; lower the price, higher demand
law of supply as price rises, quantity supplied rises; a direct relationship between price and quantity supplied
substitute goods price of substitute and demand goes UP, demand for another shifts RIGHT
complement goods inverse; price goes UP demand shifts LEFT
normal goods normal income equals increased demand
inferior goods the more you make, the less in demand
how does supply work? as prices rise, suppliers want to produce more
how does demand work? at rising prices, consumers buy less
What has an inverse relationship between quantity and price? demand
what has a positive relationship between quantity and price? supply
tariff tax on imports
import what comes in to a country
export what goes out of a country
what happens to the supply and demand model when you have an increase in supply? equilibrium price falls and quantity demanded will rise
what happens to the supply and demand model when you have an increase in demand quantity increases
what happens to the supply and demand model when you have an decrease in supply? equilibrium price rises and quantity demanded falls
what happens to the supply and demand model when you have an decrease in demand? equilibrium price falls
when is a market in equilibrium? when quantity supply and demand cross; both are stable
price control restrictions by governments to make sure things stay affordable
what happens when a price ceiling is below the equilibrium price? shortage
nominal gdp price x quantity
real gdp adjusts for change in price, uses base year price C+I+G+Xn
labor force employed+unemployed
unemployed don't have a job but are currently looking
frictional unemployment searching or waiting to take a job
structural unemployment more people seeking jobs than are available
cyclical unemployment deviation of the actual rate of unemployment, moves with business cycle
multiplier formula 1/1-MPC
tools of macroeconomics fiscal and monetary policy
When happens when the Fed increases the quantity of money? rates DECREASE, investment spending INCREASE, AD RIGHT
What happens when the Fed decreases the quantity of money? rates INCREASE, investment spending DECREASES, AD LEFT
What does it mean when nominal wages are sticky? Wages are slow to change
In the long run, what are wages considered? all prices are flexible because the economy has time to adjust
LRAS curve shows the relationship between price level and real GDP.
why is the LRAS curve vertical? if all was flexible in the long run, potential output isn't related to price level
fiscal policy what Congress and the President control
what part of the national income does the government directly control? gov purchases
what part of national income does the government influence? CIGXn
money multiplier formula 1/rr
money medium of exchange, store of value, unit of account
reserve ratio how much money the bank must hold
monetary policy attempts to affect the overall level of spending by changes in _______________________ interest rates and quantity of money
how does expansionary monetary policy work? attempt to boost economy (LOWER interest, LOWER reserve ratio, INCREASE open market operations
how does contractionary monetary policy work? reduce inflation (INCREASE interes, INCREASE reserve ratio, DECREASE open market operations
What does the Short Run Phillips Curve show? relationship between unemployment and inflation
the best measure of a country's standard of living Real GDP per capita
Human capital Economic value of a worker's experience or skills (improved efficiency)
unemployment rate formula 100(#U)/#LF
trade deficit country has more imports than exports
budget deficit gov spending exceeds tax revenue
budget balance when revenues are equal or greater than total expenses
budget surplus tax revenue exceeds gov spending
trade surplus exports more goods than imports
what are the tools available to the Fed? reserve requirements, open market operations, discount rate
inflation rise in prices
MPC marginal propensity to consume (change in consumption/change disposable income)
MPS marginal propensity to consume (change in savings/change in interest)
why is the money demand curve downward sloping? negative relationship between quantity of money demanded and the interest rate
what does the liquidity preference model show? how demand of money and supply of money influence interest rates
what relationship does the market for loanable funds model show? interaction between borrowers and savers
what does monetary policy attempt to do? achieve price stability
rule of 70 70/growth rate(interest rate)
how does technology affect the PPC? rotates or shifts the PPC out
nominal interest rate real+expected inflation
aggregate price level (APL) overall level of prices in the economy
rate of inflation new-old/old X 100
opportunity cost of holding money Interest rate an individual loses. new-old/old X 100
what happens to money holding when inflation is high? people decrease amount of money they hold
what does a negative output gap imply? economy isn't producing at full capacity (not efficient)
Created by: auweb921
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