Unit 2.1 AP Macro

AP Macro Flashcards 2.1

Circular Flow

What a household can trade for with a business

Leakages

Taxes, Savings, Imports

Injections

Investments, Gov. Spending, Exports

Private Sector

Part of the economy ran by individuals & businesses

Public Sector

Part of economy controlled by the government

Factor Payments

Payments for factor of productions (land=rent, labor=wages, capital=interest, entrepreneurship=profit)

Transfer Payments

When the government redistributes income

Subsides

Government payment to businesses

Macroeconomic Goals

Economic Growth, Limit Unemployment, Keep Prices Stable (Limit Inflation)

National Income Accounting

Economists collect statistics on production, income, investment, and savings

Output Expenditures Model

Gross Domestic Product (GDP)

is the dollar value of all final goods and services produced within a country in one year

Dollar Value

Measured in US dollars

Final Goods

GDP only counts NEW goods & services

GDP within a country

Only measure production within a country’s borders

Consumer Spending

Refers to the monetary value of what households spend on final goods and services in the product market in a given time period

Durable goods

Washing machine, Fridge, & Cars

Non- Durable Goods

Foods & Clothes

Services

Dental Work, Repairs, & Tutoring

Investment

Anything a business buys & NEW real estate

Government Spending

The value spent on final goods and services by local, state or national gov. in a given time. Public sector spending, does not include welfare, social security, & subsidies.

Net Exports

The value of all final goods and serivces exported by a country minus the value of all final goods imported by a country.

Trade Surplus

If exports are greater than imports.

Trade Deficit

If exports are less than imports.

Things that do not count towards GDP

Black Market Goods, Second Hand Goods, Goods produced in other countries, Transfer Payments, Intermediate Goods, Financial Transactions, Nonmarket Transactions