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ap macro final
| Question | Answer |
|---|---|
| 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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