AP Macroeconomics Summer Assignment

Scarcity

The fundamental economic problem where limited resources are insufficient to meet human wants and needs.

Price

The amount of money exchanged for a good or service which is, in a market, determined by the forces of supply and demand.

Aggregate Price Level

A hypothetical measurement of overall prices for all the goods and services in an economy.

Cost

The monetary value of all the resources used to produce a good or service

Opportunity Cost

The value of the next best alternative given up when you make a choice

Revenue

The total amount of income a firm recives from the sale of goods and services.

Profit

Revenue minus expenses

Forgone

Something that has been given up or sacrificed

Trade Off

A foundational decision-making situation where choosing one option means sacrificing another, arising from scarcity of resources.

Alternatives

The set of mutually exclusive options or choices available when making a decision under scarcity

Quantity Demanded

The specific quantity that a consumer is willing and able to purchase at a specified price

Quantity Supplied

The specific quantity that a producer is willing and able to offer to a market at various prices during a specified time period

Demand

All the quantities that a consumer is willing and able to purchase at various prices during a specified time period

Supply

All the quantities that a producer is willing and able to offer to a market at various prices during a specific time period

Shortage

When the quantity demanded exceeds the quantity supplied

Surplus

When the quantity supplied exceeds the quantity demanded

Productive Resources

All of the resources used to produce goods and services. These include land, labor, capital, and entrepreneurship. Also known as the factors of production. Also known as inputs.

Firm

An organization that combines the productive resources to produce goods and services that are sold in a market

Gross Income

Total earning before taxes

Disposable Income

Income left over after taxes have been paid

Profit

The difference between a firm's total revenue and its total costs

Private Enterprise

An economic system in which the production, ownership, and management are handled by individuals

Private Sector

The segment of the economy that is owned and operated by private individuals, households, and for-profit corporations rather than the government.

Public Sector

The portion of the economy that is controlled and funded by the government

Personal Budget

A structured plan that outlines an individual's expenditure against their income, used to make and plan spending and saving decisions

National Budget

The government's estimated annual financial plan that includes estimated income from tax revenue and expenditures (outlays) for the fiscal year

Fiscal Year

A consecutive 12-Month period used by the government for accounting, budgeting, and financial reporting, usually measured from October 1st to September 30th of the following year

Budget Surplus

When planned expenditures within a budget are less than revenue, results in positive savings

Budget Deficit

When planned expenditures within a budget are greater than revenue, results in a deficit which results in an increase in borrowing from lending institutions

Lending Institution

A financial organization that acts as an intermediary channeling funds from savers to investors(borrowers) chagrin interest rates on loans and paying separate interest rates on savings.

Inflation

The general increase in the price level of goods and services within an economy over time resulting in the loss of purchasing power of currency

Unemployment

The number of people who don't have a job but are looking for a job

Monetary Policy

The central bank's management of the money supply to promote the economic goals of stable prices, low unemployment, and economic growth.

Fiscal Policy

The use of taxes and government spending to promote the economic goals of stable prices, low unemployment, and economic growth

Progressive Tax

A system of taxation where the tax rate increases as taxable income increases

Regressive Tax

A system of taxation where a higher percentage burden of the tax increases as income falls

Income Tax

A progressive tax imposed by the US government on income or profits earned by individuals and corporations

Incentive

A reward or a penalty designed to alter behavior

Tax Credit

An economic incentive providing a dollar-for-dollar reduction of an individual or firm's tax liability, directly cutting the amount owned. Often used as a government policy tool.

Investment Tax Credit

A tax credit that allows individuals or businesses to reduce the amount they pay in taxes by engaging in spending on capital equipment or infrastructure

Subsidy

A financial benefit provided to a firm, or industry designed to either lower production costs and increase supply of a good or service

Tariff

A tax on imported goods

Embargo

A formal, government ordered, bad on trade with a country or entity or of a particular good

Consumption pending

Spending by households on consumer goods

Import

The purchase of foreign goods by domestic consumers

Exports

The purchase of domestic goods by foreign consumers

Land Resources

All naturally occurring resources used in production

Labor Resources

All of the physical and mental efforts used by employees in the production of goods and services

Physical Capital Resources

Human made goods used to produce other goods and services

Human Capital Resources

Knowledge and skills used to produce goods or services

Market

Anywhere where buyers and sellers come together for the purchase and sale of goods and services

Microeconomics

The study of individual markets within our economy

Macroeconomics

The study of our aggregate economy (whole economy)

Utility

The measure of satisfaction that a consumer gains from consuming a good or service

Marginal

The effect of a small incremental change in a particular variable or another variable

Marginal Utility

The measure of the change in satisfaction derived from the consumption of an additional good or service

Working Age Population

The civilian non-institutionalized population 16 and older

Savings Account

An interest bearing deposit account available at financial institutions considered to be very safe

Demand Deposit Account

An interest bearing account such as a savings or checking account that lets depositors withdraw, transfer, or spend money immediately

Investment

When firms purchase capital stock

Financial Investment

The allocation of funds into financial assets such as stocks, bonds, or bank products such as savings account, or money market mutual funds

Interest Sensitive Investment

Capital or financial investment that changes in terms of viability, profitability, or volume depending on changing interest rates.

Market Equilibrium

The point on a demand and supply graph where quantity demanded equals quantity supplied

Market Disequilibrium

The economic state of either surplus or shortage on a supply and demand graph

Determinants

Underlying factors that cause curves to shift on economic models

Firms

A business organization responsible for supplying goods and services and demanding land, labor, capital, and entrepreneurship

Households

The consumer portion of the economy responsible demanding goods and services but also supplying land, labor, and entrepreneurship

Entrepreneurship

Individuals responsible for assembling productive resources in new and innovative ways

Resource Market

Where businesses purchase the productive inputs needed to create goods and services

Product Market

The market where households trade their income for finished goods and services

Gross Domestic Product

the total money value of all final goods and services made inside a country during a set time.

Real GDP

The total value of the goods and services produced within a country's boarders within a given year that has been adjusted for inflation

Nominal GDP

The total value of the goods and services produced within a country's boarders within a given year using current year prices

Purchasing Power

The ability of money to be able to purchase goods and services

US Bureau of Labor Statistics

The US Federal agency responsible for measuring labor market activity and price level changes

Insurance

A risk management mechanism where individuals or entities pay a premium to transfer the financial burden of uncertain, high-cost losses to a larger pool

FDIC Insurance

A federal guarantee protecting bank depositors against the loss of their funds (Up to $250,000) per depositors, per institution, per ownership category

Asset

A resource owned or controlled by and individual, firm, or government

Liability

A financial obligation or debt owned by an individual, firm, or government

Interest Rates

The cost of borrowing money or the reward for saving it as a percentage of the total amount (principal) over a period of time (usually a year)

Nominal Interest Rates

The cost of borrowing money or the reward for saving it as a percentage of the principal using current year prices

Real Interest Rates

The cost of borrowing money or the reward for saving it as a percentage of the principal adjusted for inflation

Propensity

The tendency of an economic actor to allocate their income either towards savings or consumption spending

Deflation

A sustained decrease in the price level

Disinflation

A slowing of the rate of inflation

Demand Pull Inflation

Inflation caused by too many dollars chasing too few goods

Cost Push Inflation

Inflation caused by increased production costs

Stagflation

An economic condition characterized by the rare and difficult combination of slow economic growth, high inflation, and high unemployment

Stocks

An equity investment which represents legal ownership of a corporation and pays the owner a fractional amount of the corporate profit

Equity

Ownership

Bonds

An interest bearing financial instrument representing a loan from a creditor issued to a borrower

Mutual Fund

An investment vehicle that pools capital from numerous investors to purchase a diversified portfolio of securities-such as stocks, bonds, or money market instruments-managed by professional investment advisers

Nominal Wages

The amount of money an employee receives as payment expressed in current year ollars

Real Wages

The amount of money an employee receives as payment adjust for inflation

The Federal Funds Rate

The specific interest rate that banks charge each other for overnight loans. The primary policy tool used by US Federal Reserve in monetary policy

Policy Rate

A short term interest rate managed by a country's central bank as the primary tool for monetary policy

Discount Rate

The specific rate charged by the federal reserve to banks who wish to take a loan from the federal reserve

Interest on Reserves Balances Rate

The specific interest rate paid by the Federal Reserve to banks who hold a balance in their reserve account at the Federal Reserve

The Federal Reserve

The central bank of the United States

Central Bank

A public independent institution responsible for overseeing the financial system of an entire country along with its monetary system and money supply