AP microeconomics

money demand

the negative relationship between the nominal interest rate and the quantity of money demanded as an asset plus the quantity of money demanded for transactions

investment demand

the negative relationship between the real interest rate and the cumulative dollars invested

demand for loanable fund

the negative relationship between the real interest rate and the dollars invested by firm

marginal

the next unit, or increment(增长), of an action

normal profit

the opportunity of the entrepreneur;s talents; another way of saying the firm is earning zero economic profit

break-even point

the output where average total cost (ATC) is minimized and economic profit is zero P=MR=MC=ATC

business cycle

the periodic rise and fall in economic activity around its long-term growth trend

globalization

the phenomenon of growing economic linkages among countries

egalitarianism

the philosophy that all citizens should receive an equal share of the economic resources

supply of loanable funds

the positive relationship between the dollars saved and the real interest rate

aggregate supply(AS)

the positive relationship between the level of domestic output produced and the average price level of that output

gross domestic product(GDP) price deflator

the price index that compares the average price level of the goods and services that make up GDP

Demand price

the price of a given quantity at which consumers will demand that quantity

Absolute(or money ) prices

the price of a good measured in units of currency

total revenue

the price of a good multiplied by the quantity of that good sold

structural unemployment

a type of unemployment that is the result of fundamental, underlying changes in the economy such that some job skills are no longer in demand

excess capacity

the difference between the long-run output in monopolistic competition and the output at minimum average total cost

producer surplus

the difference between the price received(生产商赚到的数额) and the marginal cost of producing the good（在特定数目时， marginal cost的数额）

accounting profit

the difference between total revenue and total explicit(明显的) cost

economic profit

the difference between total revenue and total production cost, including the implicit(含蓄的) costs

production possibilities

the different quantity of goods that an economy can produce with a given amount of scare resources.

incidence of tax

the division of a tax between consumers and producers

factor distribution of income

the division of total income among labor, land, and capital

economies of scale

the downward part of the long-run average total cost (LRATC) curve where LRATC falls as plant size increase

domestic price

the equilibrium price of a good in a nation without trade

positive externality

the existence of spillover benefits for third parties from the production of a good

negative externality

the existence of spillover costs for third parties from the production of a good

determinants (shifters) of demand

the external factors that shift demand to the left or right

determinants (shifters) of supply

the external factors that shift supply to the left or right

profit-maximizing resource employment

the firm hires the profit-maximizing amount of a resource at the point where marginal revenue product(MRP)=margianl resource cost(MRC)

equity financing

the firm's method of raising funds for investment by issuing shares of stock to the public.

money supply

the fixed quantity of money in circulation at a given point in time as measured by the central bank

market share

the fraction of the total industry output accounted for by a given firm's output

foreign sector substitution effect

the process of domestic consumers looking for goods produced abroad when the domestic price levle rises, thus reducing the quantity of domestic output consumed.

interest rate effect

the process of reduced domestic consumption due to a higher price level causing an increase in the real interest rate

aggregation

the process of summing the microeconomics activities of firms and households into a macro measure of economic activity

productivity

the quantity of output that can be produced per worker in a given amount of time

marginal tax rate

the rate paid on the last dollar earned, calculated by taking the ratio of the change in taxes divided by the change in income

trade-offs

the reality of scare resources implies that individuals, firms,and governments are constantly faced with difficult choices that involve benefits an costs

property rights

the rights of owners of resources or goods to use and dispose of those items as they choose

price discrimination

the sale of same product to different groups of consumers at different price

consumption bundle(捆)

the set of all goods and services consumed by a given individual

average fixed cost (AFC)

total fixed cost divided by the level of output

total utility(TU)

total happiness received from consumption of a number of units of a good

average product of labor(APL)

total product divided by the labor employed APL=TPL/L

total revenue test

total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic

average variable cost(AVC)

total variable cost divided by the level of output AVC=TVC/Q

free trade

trade unhindered by regulations like tariffs

substitute goods

two goods are consumer substitutes if they provide essentially the same utility to the consumer

complementary goods

two goods that provide more utility when consumed together than when consumed separately

relative price

the price of one unit of good X measured not in currency, but in the number of units of good Y that must be sacrificed to acquire good X

interest rate

the price, calculate as the percentage of the amount borrowed, charges by the lender

horizontal summation

the process of adding, at each price, the individual quantities demanded to find the market demand curve for a good

nominal income

today's income measured in today's dollars, unadjusted by inflation

average total cost (ATC)

total cost divided by the level of output ATC=TC/Q

rival in consumption

a case in which one unit of a good cannot be consumed by more than oe person at the same time

bond

a certificate of indebtedness from the issuer to the bondholder

stock

a certificate that represents a claim to or share of the ownership of a firm

balanced budget multiplier

a change in government spending offset by an equal change in taxes results in a multiplier effect equal to one

market basket

a collection of goods and services used to represent what is consumed in the economy

sunk cost

a cost that has already been incurred and is not recoverable

deflation

a decline in the overall price level

domestic demand curve

a demand curve that shows the quantity of a good demanded by only domestic consumers at all prices for that good

bank

a financial intermediary that provided liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investment or investment spending needs of borrows

monopsonist

a firm that operates in a factor market in which it has absolute market power, that is a wage-setter

perfectly inelastic

Ed=0, In this special case, the demand curve is vertical and there is absolutely no response to a change in price

debt financing

a firm's way of raising investment funds by issuing bonds to the public

average tax rate

the proportion of total income paid to taxes

capital

the resources that includes equipment, machinery, buildings, and tools

least-cost rule

- the combination of labor and capital that minimizes total costs for a given production rate -this occurs where MPL/PL=MPK/PK

subsidy

-a government transfer, either to consumers or producers, of the consumption or production of a good -A government payment to support an individual, business, or group in exchange for certain actions.

excise tax

-a per-unit tax on a specific good or service. -if levied(征收) on a firm, this tax shifts the supply curve upward by the amount of the tax. -this tax also increases the marginal cost(MC), average variable cost(AVC), and average total cost(ATC) curves

macroeconomic short run

-a period of time during which the prices of goods and services are changing in their respective markets, but the input prices have not yet adjusted to those changes in the product markets -during the short run, the aggregate supply (AS) curve has three stages: nearly horizontal, upward sloping, and nearly vertical

macroeconomic long run

-a period of time long enough for input prices to have fully adjusted to market forces, all input and output markets are in equilibrium, and the economy is operating at full employment gross domestic product(GDP) -once all markets in the economy have adjusted and there exists this long-run equilibrium, the aggregate supply (AS) curve is vertical at full employment gross domestic product(GDP)

Keynesian economics

-a school of economic thought emerged out of the writing of John Maynard Keynes -a fundamental premise is that a depressed economy is the result of inadequate spending and government intervention can help move the economy back to full employment

lump-sum tax

-a tax levied on all firms or consumers(消费者) -if levied on a firm, this tax will increase average fixed cost(AFC) and average total cost(ATC) but not average variable cost(AVC) or marginal cost(MC)

seasonal unemployment

-a type of unemployment that is periodic, is predictable, and follows he calendar -workers and employment alike anticipate these changes in employment and plan accordingly, thus the damage is minimal

frictional unemployment

-a type of unemployment that occurs when someone new enters the labor market or switches jobs -this is a relatively harmless form of unemployment and is not expected to last long

cyclical unemployment

-a type of unemployment that rises and falls with the business cycle -this form of unemployment is felt economy-wide, which makes it the focus of macroeconomic policy

determinants of aggregate demand(AD)

-aggregate demand is a function oF four components of domestic spending(C, I, G, [X-M]) -if any of these component increases(decreases), holding the others constant, AD increases (decrease), or shift to the right(left)

determinants of aggregate supply(AS)

-aggregate supply is a function of many factors that impact the production capacity of the nation -if these factors make it easier, or less costly, for a nation to produce, AS shifts to the right

liability of a bank

-anything owned by depositors or lenders is a liability to the bank -checking deposits of citizens or loans made to the bank are liabilities to the bank

asset of a bank

-anything owned by the bank or owed to the bank is an asset of the bank -cash on reserve is an asset as are loans made to citizens

automatic stabilizers

-built-in fiscal policy mechanisms that automatically regulate, or stabilize, the macro economy as it moves through the business cycle, by changing net taxes collected by the government. -these stabilizers increase a deficit during a recessionary period and increase a budget surplus during inflationary period, without any discretionary change in the part of the government

discouraged workers

-citizens who have been without work for so long that they become tired of work and drop out of the labor force -because these citizens are not counted in the rank of unemployed

determinants of elasticity

-demand for a good will generally be more elastic if : _the good has more readily available substitutes; _the sonsumers spends a high proportion of his or her income on that good; _the consumer has more time to adjust to a price change

determinants of consumption and saving

-factors that shift the consumption and saving functions in the opposite direction are wealth, expectations, and household debt -the factors that change consumption and saving functions in the same direction are taxes and transfers

supply-side fiscal policy

-fiscal policy centered on incentives to save and invest to prompt economic growth with very little inflation -in the aggregate demand/ aggregate supply(AD/AS) model, these policies are aimed at shifting the AS curve to the right

values of cross- price elasticity of demand

-if Ec>0, goods X and Y are substitutes -if Ec<0, goods X and Y are complementary

values of income elasticity

-if Ei>1, the good is normal and a luxury -if 0<Ei<1, the good is normal and a necessity -if Ei<o, the good is inferior

relationship between marginal product of labor(MPL) and marginal cost(MC)

-if labor is the variable input being paid a fixed wages(W), MC and MPL are inverses of each other -MC=w/(differences of Q/differences of L)=w/MPL

slope and elasticity

-in general, the more vertical a good's demand curve, the more inelastic the demand for that good -the more horizontal a good's demand curve, the more elastic the demand for that good -despite this generalization, be careful, as elasticities and slopes are not equivalent measures.

decision to invest

a firm will invests in projects so long as the expected rate of return is as great the real interest rate

prisoner's dilemma

a game where the two rivals achieve a less desirable outcome because they are unable to coordinate their strategies

inferior good

a good for which demand decreases with an increase in consumer income

normal goods

a good for which demand increases with an increase in consumer income

Luxury

a good for which the proportional increase in consumption is greater than the proportional increase in income Ei > 1

necessity

a good for which the proportional increase in consumption is less than the proportional increase in income 0 < Ei < 1

cartel

a group of firms that agree to maximize their joint profits rather than compete

utils(跑龙套)

a hypothetical unit of measurement often used to quantify utility; also referred to as "Happy Points."

price ceiling

a legal maximum price, above which the product cannot be sold

price floor

a legal minimum price, below which the product cannot be sold

import quota

a limitation on the amount of a good that can be imported into the domestic market

curve

a line on a graph that shows the relationship between two variables

monopolistic competition

a market structure characterized by a few small firms producing a differentiated product with easy entry into the market

imperfect competition

a market structure in which firms have market power to affect the prices

monopoly

a market structure in which one firm is the sole producer of a good with no close substitutes in a market with entry barriers

liquidity

a measure of how easily an asset can be converted to cash

income elasticity

a measure of how sensitive the consumption of a good is to a change in consumer's income(Ei)

cross-price elasticity of demand

a measure of how sensitive the consumption of good X is to a change in the price of good Y

price index

a measure of the average level of price in a market basket for a given year, , when compared to the prices in a reference(base) year

closed economy

a model that assumes there is not foreign sector(imports and exports)

technology

a nation's knowledge of how to produce goods in the best possible way

short run

a period of time too short to change the size of the plant, but many other more variable resources can adjusted to meet demand (A period during which at least one of a firm's resources is fixed)

long run

a period or time long enough for the firm to alter all production inputs, including the plant size.

contraction

a period where real gross domestic product(GDP) is falling

expansion

a period where real gross domestic product(GDP) is growing

out of the labor force

a person is classified as out of the labor force if he or she has chosen to not seek employment

employed

a person is employed if he or she has worked for pay at least one hour per week

unempolyed

a person is unemployed if he or she is currently not working but is actively seeking work.

consumption function

a positive relationship between disposable income and consumption

saving function

a positive relationship between disposable income and saving

minimum wage

a price floor in the labor market

depression

a prolonged, deep trough in the business cycle

tax bracket

a range of income on which a given marginal tax rate is applied

investment tax credit

a reduction in taxes fro forms that invest in new capital like a factory or piece of equipment

model

a simplified representation of a real situation used to better understand real-life situation

autarky

a situation in which a country does not trade with other countries

inefficient

a situation in which there are missed opportunities; some people could be made better off without making other people wore off

surplus

a situation in which, at the going market price, the quantity supplied exceeds the quantity demanded

shortage

a situation in which, at the going market priec, the quantity demanded exceeds the quantity supplied.

stagflation

a situation seen in the macro economy when inflation and the unemployment rate are both increasing

dominant strategy

a strategy that is always the best strategy to pursue, regardless of what a rival is doing

balance of payments statement

a summary of the payment received by the United States from foreign countries and the payments sent by the United States to foreign countries

demand of labor

-shows the quantity of labor demanded at all wages -labor demanded for the firm hiring in a competitive labor market is the MRPL curve

tax multiplier

-the amount by which real gross domestic product (GDP) changes due to a change in taxes -Tm=(difference of GDP)/ (difference of Taxes)= MPC*Multiplier= MPC/MPS

domestic supply curve

a supply curve that shows the quantity of a good supplied by only domestic suppliers at all prices for that good

economy

a system for coordinating(协调) society's productive activities

fractional reserve banking

a system in which only a fraction of the money deposited in banks is held in reserve as currency

demand schedule

a table showing quantity demanded for a good at various prices

supply schedule

a table showing quantity supplied for a good at various prices

balance sheet or t-account

a tabular way to show the assets and liabilities of a bank

regressive tax

a tax where the proportion of income paid in taxes decreases as income rises

proportional tax

a tax where the proportion of income paid in taxes is constant no matter the level of income

progressive tax

a tax where the proportion of income paid in taxes rises as income rises

patent

a temporary monopoly given by the government to an inventor for the use or sale of an invention

constant cost industry

entry (or exit) does not shift the cost curves of firms in the industry

increasing costs industry

entry of the new firm shift the cost curves for all firms upward

decreasing of cost industry

entry of the new firm shifts the cost curves of all firms downwards

budget deficit

exists when government spending exceeds revenue collected from taxes

budget surplus

exists when revenue collected from taxes exceeds government spending

full employment

exists when the economy is expecting no cyclical unemployment

determinants of exchange rates

external factors that increase the price of one currency relative to another

secondhand sales

final goods and services that are resold

spending multiplier

-the amount by which real gross domestic product(GDP) changes due to a change in spending -M=(DIFFERENCE OF GDP)/ (DIFFERENCE OF SPENDING)= 1/MPS = 1/(1-MPC)

equation of exchange

- the eqution says that nominal gross domestic product(GDP)(P*Q) is equal to the quantity of money(M) multiplied by the number of times each dollar is spent in a year(V) -MV=PQ

expected (anticipated) 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

federal funds rate

- the interest rate paid on short-term loans made form one bank to another -when this rate is a target for an open market operation(OMO), bonds are bought or sold accordingly until the interest rate target has been met

nominal rate of interest

- the interest rate unadjusted for inflation -the opportunity cost of holding money in the money market

marginal social cost

- the marginal cost of production plus the marginal external cost -with negative externalities, the marginal social cost curve lies above the market supply curve

excess reserves

- the portion of a deposit that may be borrowed by customers -excess reserves= (1- reserved ratio)*(total desposits)

monopoly long-run equilibrium

-Pm>MR=MC, output is not allocatively efficient Deadweight loos exists. -Pm>ACT, so this isn ot productively effcient -economic profit is greater than zero, so consumersurplus is trandferred to the firm as profit

monopolistic competition long-run equilibrium

-Pmc>MR>MC, so there is allocative inefficiency -Pmc=ATC, so economic profit equals zero

Phillips curve

- a graphical device that shows the relationship between inflation and the unemployment rate -in the short run, it is downward sloping and in the long run it is vertical at the natural rate of unempolyment

market failure

- occurs when a market fails to be efficient -markets fail when externalities or public goods are present

asset demand

- the amount of money demanded as an asset is negatively related to the real interest rate -as nominal interest rates rise, the opportunity cost of holding money begins to rise and you are more likely to lessen your asset demand for money

velocity of money

- the average number of times a dollar is spent is a year -in the Equation of Exchange, V=PO/M

relationships between Average Product of Labor(APL) and Average Variable Cost (AVC)

-in the simplified case where labor is the variable input being paid a fixed wage(w), AVC and APL are inverses of each other -AVC/w/(Q/L)=w/APL

money multiplier(MM)

-measures the maximum amount of new checking deposits that can be created by a single dollar of excess reserves -MM=1/reserve ratio

price elasticity of demand

-measures the sensitivity of consumers' quantity demanded for good X when the price of good X changes

renewable resources

-natural resources that can replenish themselves if they are not overharvested

nonrenewable resources

-natural resources that cannot replenish themselves -examples: fossil fuels and copper

macroeconomic equilibrium

-occurs when the quantity of real output demanded is equal to the quantity of real output supplied -graphically this at the intersection of aggregate demand(AD) and aggregate supply (AS). Equilibrium can exist at, above or below full employment

fiat money

-paper and coin money used to make transaction because the government declares it to be legal tender -because it has no intrinsic value, it is backed by the public's trust that the government maintains its value

reserve ratio(rr)

-rr=(required reserves)/ (total deposits) -the fraction of total deposits that must be kept on reserve

barrier to entry

-something that prevents other firms from entering an industry -typical barriers include economies of scale, control over scarce inputs, technological superiority, and barriers created by government.

transaction demand

-the amount of money held in order to make transactions -this is not related to the interest rate, but increases as nominal gross domestic product(GDP) increases

marginal utility(MU)

-the change in an individual's total utility from the consumption of an additional unit of a good or service -MU= DIFFERENCE OF TU

determinants of labor demand

-the external factors that influence labor demand -when these variables change, the entire demand curve shifts to the left or right

aggregate demand(AD)

-the inverse relationship between all spending on domestic output and the average price level of that output -aggregate demand measures the sum of consumption spending by households, investment spending by firms, government purchases of goods and services, and the net exports bought by foreign consumer

marginal social benefit

-the marginal benefit that accrues to consumers plus the marginal external benefit -with positive externalities the marginal social benefit curve lies above the market demand curve

market for loanable funds

-the market for dollars available to be borrowed for investment projects -equilibrium in this market is determined at the real interest rate where the quantity of dollars saved(supply) is equal to the quantity of dollars borrowed(demand)

M1

-the most liquid measure of money definitions and the basis for all other more broadly defined measures of money -M1=cash +coins+checking deposits+ traveler's checks

capital flow

-the net inflow of funds into a country -the difference between the total inflow of foreign funds to the home country and the total outflow of domestic funds to other countries

shutdown point

-the output where average variable cost(AVC) is minimized -if the price falls below this point, the firm chooses to shut down or produce zero units in short run. -in the case of shut down, economic losses are equal to the total fixed costs(TFCs)

unemployment rate(UR)

-the percentage of the labor force(LF) that falls into the unemployed(U) category -UR=100*(U/LF)

required reserves

-the portion of a deposit that must be held at the bank for withdrawals -required reserves= reserve ratio total deposits

consumer price index(CPI)

-the price index that measures the average price level of the items in the base year market basket -Main measure of consumer inflation

net export effect

-the process of how expansionary fiscal policy decreases net exports due to rising interest rates -another form of crowding out

interdenpendence

-the relationship among firms when their decision significantly affect one another's profit -a key characteristic of oligoolies

labor force(LF)

-the sum of all individuals 16 years and older who are either currently employed(E) or unemployed(U) -LF=E+U

perfectly competitive long-run equilibrium

-there is no more incentive(刺激) for firms to enter or exit

real income

-today's income measured in base year dollars -these inflation-adjusted dollars can be computed from year to year to determine whether purchasing power has increaesd or decreased

theory of liquidity prefernce

John Maynard Keynes' theory that the interest rate adjusts to bring the money market into equilibrium

open market operation(OMO)

a tool of monetary policy, it involves the Fed's buying (or selling) of treasury bonds from (or to ) commercial banks and the general public

price inelastic demand

Ed < 1 or the (%ΔQd) < (%ΔP). Consumers are not price sensitive

price elastic demand

Ed > 1, meaning consumers are price sensitive

unit elastic demand

Ed=1. The percentage change in price is equal to the percentage change in quantity demand

perfectly elastic

Ed=infinite. In this special case, the demand curve is horizontal meaning consumers have an instantaneous & infinite response to a change in price

M2

M2 includes M1, savings deposits, small time deposits, and money market and mutual funds balance

M3

M3 includes M2 and large time deposits

Coase theorem

Ronald Coase proposed that even in the presence of externalities an economy can still find an efficient outcome through negotiations, so long as there are minimal transactions costs

oligopoly

a very diverse market structure characterized by a small number of interdependent large firms, producing either a standardized or differentiated product in a market with a barrier to entry

strategic behavior

actions taken by a firm that attempt to influence the future behavior of other firms

spillover benefits

additional benefits to society, not captured by the market demand curve, form the production of a good

spillover cost

additional costs to society, not captured by the market supply curve from the production for a good

Law of demand

all else equal, when the price of a good rises, the quantity demanded of that good falls

law of supply

all else equal, when the price of a good rises, the quantity supplied of that good rises

profit-maximizing rule

all firms maximizing profit by producing where marginal return (MR) = marginal cost(MC)

resources

also called "factors of production," these are commonly grouped into the four categories: labor, physical capital,land(natural resources), and entrepreneurial(企业家的) ability

Market Economy(Capitalism)

an economic system in which resources are allocated through the decentralized(分散化的) decisions of firms and consumers

supply shocks

an economy-wide phenomenon that affects the costs of firms and results in a shifting aggregate supply(AS) curve

protective tariff

an excise tax levied on an imported good produced in the domestic market so that the good may be protected in the domestic market so that the good may be protected from foreign competition

revenue tariff

an excise tax levied on goods not produced in the domestic market

inflation

an increase in the overall price level

duopoly

an oligopoly consisting of only two firms

the firm

an organization that employs factors of production to produce a good or service that it hopes to profitably sell

dissaving

another way of saying that saving is less than zero

disequilibrium

any price where the quantity demanded does not equal the quantity supplied

rental rate

the cost, implicit or explicit, of using a unit if land or capital for a given period of time

law of increasing costs

as more of a good is produced, the greater is its opportunity (or marginal ) cost

law of diminishing marginal returns

as successive units of a variable resources are added to a fixed resource, beyond some point the marginal product will decline.

wealth effect

as the average price rises, the purchasing power of wealth and savings begins to fall. higher prices, therefore, tend to reduce the quantity of domestic output purchased.

elasticity and demand curves

at the midpoint of a linear demand curve, Ed =1 . above the midpoint demand is elastic , and below the midpoint demand is inelastic.

nonprice competition

competition occurs between firms in areas not related to price. these areas can include advertising, new product features, or research

tacit collusion

cooperation among producers, without a formal agreement, to limit production and raise prices so as to raise one another'sprofits

contractionary fiscal policy

decreases in government spending on higher net taxes meant to shift aggregate demand(AD) to the left toward full employment and reduce the inflationary pressures

contractionary monetary policy

decreases in the money supply meant to increase real interests rates, shift aggregate demand(AD) to the left toward full employment, and reduce inflationary pressures

Fiscal policy

deliberate changes in government spending and net tax collection to affect economic output, unemployment, and the price level

derived demand

demand for a resource arises from the demand for the goods produced by the resource

excludable

describes a situation in which suppliers can prevent those who do not pay from consuming the good

nonexcludable

describes a situation in which suppliers cannot prevent those who do not pay from consuming the good

explicit cost

direct, purchased, out-of-pocket cost, paid to resource suppliers out side the firm; also referred to as "accounting costs"

income effect

due to a higher price, the change in quantity demanded that results from a change in the consumer's purchasing power (or real income)

constrained utility maximization

given prices and income, a consumer stops consuming a good when the price paid for the next unit is equal to the marginal utility received(就是买的再多，不会更开心)

imports

goods and services purchased from other countries

exports

goods and services sold to other countries

final good

goods ready for their final use by consumers and firms

public goods

goods that are both nonrival and excludabe

private goods

goods that are both rival and excludable

intermediate goods

goods that require further modification before they are ready for their final use by consumers and firms

nonmarket transaction

household work or do-it-yourself jobs that are missed by gross domestic product (GDP) accounting

future value

if r is the current interest rate, the future value of $1 invested today is $1*(1+rr)

present value

if r is the current interest rate, the present value of $1 received one year from now is $1/(1+r)

law of diminishing marginal utility

in a given time period, as consumption of an item increases, the marginal(additional) utility from that item falls

nash equilibrium

in game theory, the equilibrium that results when all players choose the action that maximizes their payoffs, given the actions of other players

recession

in the aggregate demand/ aggregate supply(AD/AS) model, a recession is seen as a leftward shift of AD

expansionary fiscal policy

increases in government spending or lower net taxes meant to shift aggregate demand (AD) to the right toward full employment and lower the unemployment rate

expansionary monetary policy

increasing in the money supply meant to decrease real interest rates, shift aggregate demand(AD) to the right toward full employment, and reduce the unemployment rate

implicit costs

indirect, nonpurchased, or opportunity costs of resources provided by the entrepreneur

demand-pull inflation

inflation that is the result of stronger aggregate demand(AD) as it continues to increase in the upward sloping range of aggregate supply(AS)

marginal analysis

making decisions based upon weighing the marginal benefits and costs of that action. The rational decision maker will choose an action if the marginal benefit is greater that or equal to the marginal cost(MB>=MC)

factor market

markets in which firms buy the resources they need to produce the goods and services

price elasticity of supply

measures the sensitivity of producer's quantity supplied for good X when the price of good X changes

elasticity

measures the sensitivity, or responsiveness, of a choice to a change in an external factor

noncollusive oligopoly

models of industries in which firms are competitive rivals seeking to gain at the expense of the their rivals

collusive oligopoly

models where firms agree to work together to mutually improve their situations

functions of money

money serves three functions: a medium of exchange, a unit of account, and a store of value

time value of money

money today is more valuable than the same amount of money in the future

unions

organizations of workers that try to raise wages and improve working conditions for their members through collective bargaining

total variable costs(TVCs)

production costs that change with the level of output

total fixed costs(TFCs)

production costs that do not vary with the level of output

fixed inputs

production inputs that cannot be changed in the short run

variable input

production inputs the firm can adjust in the short run to meet changes in demand for its output

specialization

production of goods or performance of tasks based upon comparative advantage

productive efficiency

production of maximum output for a given level of technology and resources

allocative efficiency

production of the combination of goods and service that provides the most net benefit to society; achieved when the marginal benefit equals the marginal cost(MB=MC) of the next unit.

Recession

roughly determined by two or more consecutive quarters of falling real gross domestic product(GDP)

public saving

saving conducted by government; equal to the differences between tax revenue collected and spending on goods and services

private saving

saving conducted by household; equal to the difference between disposable income and consumption

demand curve

shows the quantity of a good demanded at all prices

supply curve

shows the quantity of a good supplied at all prices

consumer surplus

the diference between buyer's willingness to pay(顾客对产品价值的预计消费) and the price actually paid

consumption and saving schedule

tables that show the direct relationship between disposable income and consumption and savings

official reserves account

the Fed's adjustment of a deficit or surplus in the current and capital account by the addition or subtraction of foreign currencies so that the balance of payments is zero

comparative advantage

the ability to produce a good at a lower opportunity cost than all other producers.

absolute advantage

the ability to produce more of a good than all other producers

market power

the ability to set the price above the perfectly competitive level

barter

the act of exchanging goods and services for other goods and services

marginal benefit(MB)

the additional benefit received from the consumption of the next unit of a good or service

marginal cost(MC)

the additional cost of producing one more unit of output

marginal cost(MC).

the additional cost of producing one more unit of output MC= differences of TVC/differences of Q

inflationary gap

the amount by which equilibrium real gross domestic product(GDP) exceeds full employment GDP

recessionary gap

the amount by which full employment gross domestic product(GDP) exceeds equilibrium real GDP

autonomous consumption

the amount of consumption that occurs no matter the level of disposable income

human capital

the amount of knowledge and skills that labor can apply to the work done

exchange rate

the amount of one currency that must be given up to get one unit of the second currency

autonomous saving

the amount of saving that occurs no matter the level of disposable

all else equal

the assumption that all other variables are held constant so we can predict how a chang in one variable affects a second. Also sometimes referred to as the ceteris paribus assumption.

trough

the bottom of the cycle where a contraction has stopped and is about to turn up

microeconomics

the branch of economics that studies how people and firms make decisions

Macroeconomics

the branch of economics that studies national and international economics

sticky prices

the case when price level do not change, especially downward, with changes in aggregate demand(AD)

natural monopoly

the case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand than for multiple firms to share the market

marginal propensity(习性) to consume(MPC)

the change in consumption caused by a change in disposable income, or the slope of the consumption function

substitution effect

the change in quantity demanded resulting from a change in the price of one good relative to the price of other goods

marginal propensity to save(MPS)

the change in saving caused by a change in disposable income, or the slope of the saving function

marginal resource cost(MRC)

the change in the firm's total cost from the hiring of an additional unit of an input

marginal revenue product(MRP)

the change in the firm's total revenue from the hiring of an additional unit of an input

marginal product of labor(MPL)

the change in total product resulting from a change in the labor input MPL=differences of TPL/difference of labor

utility maximizing rule

the consumer choose amounts of goods X and Y, with his or her limited income, so that the marginal utility per dollar spent is equal for both goods.

real rate of interest

the cost of borrowing to fund an investment and equal to the nominal interest rate minus the expected rate of inflation

real rate of interest

the cost of borrowing to fund in investment; equal to the nominal interest rate minus the expected rate of inflation

world price

the global equilibrium price of a good when nations engage in trade

production possibility frontier(curve)

the graphical device used to show the production possibilities of two goods

utility

the happiness, benefit, satisfaction, or enjoyment gained from consumption of goods and services

constant returns to scale

the horizontal range of long-run average total cost (LRATC) where LRATC is constant over a variety of plant sizes

multiplier effect

the idea that a change in any component of aggregate demand creates a larger change in gross domestic product(GDP)

scarcity

the imbalance between limited productive resources and unlimited human wants

disposable income(DI)(可支配收入)

the income a consumer has left over to spend or save once her or she has paid net taxes

economic growth

the increase in an economy's production possibilities over time

discount rate

the interest rate commercial banks pay on short-term loans from the Fed

free-rider probem

the lack of private funding for a public good due to the presence of free-riding individuals who will not contribute to provision of the good

autonomous investment

the level of investment determined determined by investment demand that is independent of the level of gross domestic product(GDP)

deadweight loss

the lost net benefit to society caused by a movement away from the competitive market equilibrium

gross domestic product(GDP)

the market value of the final goods and services produced within a nation in a given period of time

willingness to pay

the maximum price a consumer is prepared to pay for a good

production function

the mechanism for combining production resources, with existing technology into finished goods and services.

double counting

the mistake of including the value of intermediate stages of production in gross domestic product(GDP) on top of the value of the final good

perfect competition

the most competitive market structure is characterized by many small price-taking firms producing a standardized production an industry in which there are no barriers to entry or exit

product differentiation

the strategy of creating real or perceived differences in a firm's product in order to increase sales

economics

the study of how society allocates scarce resources

aggregate income(GDP)

the sum of all income earned by the suppliers of resources in the economy

aggregate spending(GDP)

the sum of all spending from four sector of the sconomy

total welfare(福利)

the sum of consumer surplus and producer surplus(ps. jus t mathematically)

monetary base

the sum of currency in circulation and bank reserevs

four-firm concentration ratio

the sum of the market of the four largest firms in an industry

total cost(TC)

the sum of total fixed and total variable costs at any level of output

monetarim

the theory of business cycles that asserts gross domestic product(GDP) will grow steadily if the money supply grow steadily

marginal productivity theory

the theory that a citizen's share of economic resources is proportional to the marginal revenue product of his or her labor

quantity theory of money

the theory that the quantity of money determines the price level and the growth rate of money determines the rate of inflation

leisure

the time available for purpose other than working to earn money to buy goods and services

peak

the top of the business cycle where an expansion has ethe top of the business cycle where an expansion has ended and is about to turn downnded and is about to turn down

total product of labor(TPL)

the total quantity of output produced for a given quantity of labor employed

natural rate of unemployment

the unemployment rate associated with full employment, somewhere between 4 percent and 5 percent in the United States.

underground economy

the unreported or illegal activity, bartering, or informal exchange of cash for goods and service that will not be reported in official tabulations of gross domestic product(GDP)

diseconomies of scale

the upward of the long-run average total cost(LRATC) curve where LRATC rises as plant size increases

real gross domestic product(GDP)

the value of currentproduction, but using prices from a fixed point in time

nominal gross domestic product(GDP)

the value of the current production at the current prices

opportunity cost

the value of the sacrifice made to pursue a course of action

income distribution

the way in which total income is divided among the owners of the various factors of production

base year

the year that serves as a reference point for constructing a price index and comparing real values over time

current account

this account shows current import and export payment of both goods and services and investment income sent from the United States to foreign investors, and investment income received by U.S. citizens who invest abroad

capital(or financial) account

this account shows the flow of investment on real or financial assets between a nation and foreigners

market equilibrium

this exists at the only price where the quantity supplied equals the quantity demanded. or it is the only quantity where the price consumers are willing to pay is exactly the price producers are willing to accept

expected real rate of return

this is the rate of profit the firm anticipates（预期） receiving on investment expenditures(支出). It can be thought of as the marginal benefit of an investment project

circular flow of economic activity

this model shows how households and firms circulate resources, goods, and incomes through the economy.The basic model is expanded to include the government and foreign sector

crowding out effect

typically the result of government borrowing to fund deficit spending, this is the decline in spending in one sector due to an increase in spending from another sector

supply-side boom

when the aggregate supply(AS) curve shifts outward and the aggregate demand (AD) curve stays constant, the price level falls, real gross domestic product(GDP) increases , and the unemployment rate falls

appreciating(depreciating) currency

when the value of a currency is rising (falling )relative to another currency, it is said to be appreciating (depreciating)