AP Mac
Marginal Propensity To Consume
MPC = Marginal Propensity to Consume - the ratio of the change in consumption spending to a given change in income. MPC = change in C/change in Y.
Marginal Propensity To Save
MPC = Marginal Propensity to Consume - the ratio of the change in consumption spending to a given change in income. MPC = change in C/change in Y.
Price Index
Measure Inflation. Formula nominal year divided by base year times 100.
Expected Inflation
The inflation expected in a future time period. This expected inflation is added to the real interest rate to compensate for lost purchasing power.
Multiplier Effect
The spending by CxIxGxNX. Total Spebding. One persons spending becomes another persons income.
Microeconomics
The study of how households and firms make decisions and how they interact in markets.
Federal Debt
The sum of all the money that the federal government has borrowed over the years and not yet repaid.
Change in Quantity Demanded
The whole curve of quantity demanded vs price has shifted.
Externalities
Benefit or harm caused by the sale or consumption of products to people who are not involved in the transaction and didn't pay for the product.
AD Curve Shifters
C+I+G+NX, Tax Money Supply, Interest Rates, Saving Habits, Expectations(Pessimistic,Optimistic,Confidence) Transfer Payments, Foreign Exchange Rate.
Structural Unemployment
Changes over time in consumer demand and technology change the "structure" of total demand for labor. Some skills not needed, become obsolete, and new skills will appear.
Perfect & Pure Competition
# of buyers and sellers. Identical products, well informed, independently, easy to enter/exit.
Unemployment Rate
(Number unemployed)/(Labor Force) X100.
Monopoly
(economics) A market in which there are many buyers but only one seller of a product. One company has complete control. Technological, Geographic, Natural, Gov.
Tax Multiplier
-MPC/MPS. Whatever the spending multiplier is the tax multiplier is 1 leas.
Spending Multiplier
1/MPS
Partnership
2or more people. Easy to start, manage, raise $, attract qualified customers, and to end. No business tax. Potential conflict.
Subsidy
A benefit given by the gov to groups or individuals usually in the form of a cash payment or tax reduction.
Deflation
A decline in the price level.
Federal Gov
A form of government in which powers are divided between a central government and several local governments.
Public Goods
A good that, once produced is available for all to consume, regardless of who pays and who doesn't. They are are nonrival and nonexclusive, such as a safer community.
Conglomerate
A group of diverse companies under common ownership and run as a single organization.
Price Ceiling
A legal maximum on the price at which a good can be sold.
Price Floor
A legal minimum on how much a good can be sold.
Oligopoly
A market form in which a market or industry is dominated by a small number of sellers.
Monopolistic Competition
A market structure in which many companies sell products that are similar but not identical.
Price Elasticity Of Demand
A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in Quantity Demanded divided by the percentage change in price.
Consumer Price Index
A measure of the cost of living for the typical household; it compares the value of a basket of goods and services in one year with the value of the same basket in a base year. Inflation (and deflation) are measured as a percentage change in the value of the basket from one year to another. Formula: price of basket goods divided by price in base year times 100.
GDP Deflator
A measure of the price level of goods and services included in GDP. Real GDP per capita. Reflects prices of goods and services but not quantities produced. Formula: nominal GDP divided by real GDP times 100.
Trough
A period during which economic output is at its lowest level following a recession or depression. (B)
Recession
A period of at least six months after a peak and before a trough during which the economy declines as measured by gross domestic product. Unemployed & UR go up. Real GDP goes down.
Expansion
A phase of the business cycle in which real GDP, income, and employment rise. UE/UR goes down. Real GDP goes up.
Inflation
A rise in the general level of prices in an economy. Formula: New Consumer Price Index - Old Consumer Price Index divided by old CPI times 100. Borrowers, Cost of living; allowance, adjustment.
Surplus
A situation in which quantity supplied is greater than quantity demanded.
Budget Surplus
A situation that occurs when a grovernment spends more than it collects in revenues.
Regressive Tax
A tax for which the percentage of income paid in taxes decreases as income increases.
Proportional Tax
A tax in which the average tax rate is the same at all income levels. Ex Social Security.
Supply
A total amount of a specific good or service that is available to consumers.
Real GDP in constant dollars
Adjusted for inflation(no inflation). Formula: nominal GDP divided by price index and then multiply by 100.
Business Cycle
Alternating periods of economic growth and contraction, which can be measured by changes in real GDP
Base Year
Always 100. If they don't offer a base year use an earlier year.
Long-Run Aggregate Supply Curve
Always Vertical, no cyclical unemployment. At full employment.
MPC + MPS
Always equals one.
Market Economy
An economy that allocates resources through the decentralized decisions of many firms and households as they interact for goods and services.
Command Economy
An economy where production, investment, prices, income are determined centrally by a government.
Unanticipated Inflation
An increase in the general level of prices that was not expected by most decision makers. Gains: Borrowers, Cost of living adjustment/allowance. Makes inflation more severe to certain groups: fixed income, savers, creditors, savers.
Multinational
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
Unemployed
Any person 16 years or older who is not working, available for work, and has made specific efforts to find work during the previous 4 weeks.
Capitalism
Economic System in which trade,industry, and the means of production are largely or entirely privately owned and operated for profit.
Horizontal (cyclical)
Economy is in a recession. Inefficient yse of resources. Shifters: External Shock, Productivity, Cost of inputs, gov regulation, technology.
Mixed Market Economy
Economy where both the public and private sector own, allocate and control factors of production.
Laborforce Participation Rate
Employed + Unemployed. Percent of the adult population that is in the labor force. Formula: labor force divided by average population times 100.
Seasonal Unemployment
Employment for jobs change as they are only available at certain times of the year. It is a type of periodic unemployment as it depends on weather. Shortest type of unemployment.
FICA
Federal Insurance Contributions Act., (Federal Insurance Contribution Act) Amount of money the gov takes away from your paycheck for Social Security and Medicare. P rovides for a federal system of old-age, survivors, disability, and health-care insurance.
Multiplier
For every dollar a person receives they can either spend it or save it.
Capital Goods
Goods that are used to produce a service.
Fiscal Policy
Government policy that attempts to manage the economy by controlling taxing(revenue) and spending(expenditures).
Nominal GDP/Current GDP
Has not been adjusted for inflation. Formula: Price * Quantity.
Adam Smith
He believed that the money you make is because of the goods price produced by labor. He observed that the more a worker unskilled at a certain job, the better they will be. He said that new machinery and the division & specialization of labor contributed to an increase of power and wealth. He argued that the free market system with competition together would act as an "invisible hand".
Peak
High point at which economy is at its strongest and most prosperus. (C)
Gov Revenue
Income
Discouraged Workers
Individuals who would like to work but have given up looking for a job. Not counted in the unemployment rate.
Cost Push
Inflation caused by reductions in short-run aggregate supply (i.e., by a leftward shift in the short-run aggregate supply curve).
Demand Pull
Inflation resulting from an increase in aggregate demand. Increases in the following factors: money supply, government purchases, and price level in the rest of the world can impact this.
Local
Intergovernmental Revenue, Property Tax.
States
Intergovernmental Revenue, Sales Tax.
Economic Growth
New resources/technology. Moving to the right.
Trade Offs
Next best choices
Sole Proprietorship
One owner. 70% of business/firms. Don't share profits, make all decisions , easy to: start,end,stop. No business tax, psychological satisfaction, unlimited liability, difficult: in raising financial capital, manage, attract qualified customers. Limited Life.
Market Structures
Perfect/Pure Competition, Monopolistic competition, oligopoly, monopoly.
Consumer Goods
Personal Use
3 types of taxes
Proportional, Progressive, and Regressive
GDP doesn't count
Quality of the environment, pollution, health of an individual, leisure time.
Cyclical Unemployment
Recession phase of a business cycle where the economy is producing at less than full capacity. Rises when economy sucks and falls when the economy is good.
Production Possibilities Curve/Frontier
Resources are fixed. Only looks at two things. A(inside) Inefficient use of the resources. Under/Unemployed Recession. B(on the line) Resources are used efficiently. Full employment. C(outside) There is not much enough resources. (Pregnant Woman)
Business Organization
Sole Proprietorship, Partnership, Corporation.
Expansionary
Taxes go down, spending goes up.
Contractionary
Taxes go up, spending goes down.
Progressive tax
Taxes people with higher income at a higher rate than people with lower income.
Demand
The amount of a particular economic good or service that a consumer or group of customers will want to purchase at a given price.
Aggregate Demand
The amount of goods and services in the economy that will be purchased at all possible price levels.
Law Of Supply
The claim that other things equal, the quality supplied of a good rises when the price of the good rises.
Law Of Demand
The claim that, other things equal, the quantity demanded of a good falls when the price of the good rises.
Marginal Utility
The gain from an increase or loss from a decrease in the consumption of that good or service.
Excessive Momentary Growth
Too much money. Government deficit spending. Consequences: Decline purchasing power, value of the dollar is less, spending habits change.
Aggregate Supply Curve
Total Productions of goods & services by businesses.
Traditional Economy
Traditions,customs,beliefs shape the goods and the products the society makes.
Human Capital
Training, education,knowledge,skilled,talent,motivation,healthy.
Corporation
Unlimited liability, hire the best, raise $ capital, unlimited life, easy to transfer ownership. W/K- gov regulation, difficult start, business tax(corporate tax). Owners:Nothing, Board of Directors: Something. Common Stock gets payment first., A business owned by stockholders who share in its profits but are not personally responsible for its debts
Short-Run Aggregate Supply Curve
Upward Sloping
Movement along AD Curve
Wealth Effect, interest rate effect, exchange rate(nx).
Change in Quantity Supplied
When a non price determinant of supply changes.
Shortage
When quantity demanded is greater then quantity supplied.
Market Equilibrium
When the supply of an item is exactly equal to its demand.
Productivity
Worker skilled at a specific task
Federal Deficit
an excess of the federal government's spending over its revenue.
Balanced Budget
budget in which when revenues are equal to spending.
Government Expenditures/Spending
the dollar value of goods and services sold to governments.
Frictional Unemployment
unemployment caused by the normal search time required by workers with marketable skills who are changing jobs, initially entering the labor force, reentering the labor force, or seasonally unemployed.