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.