AP Macroeconomics Cram Notes:

Scarcity

The limitation of resources while human wants are unlimited, forcing society to make choices.

Opportunity Cost

The value of the next best alternative that must be forgone when a choice is made.

Factors of Production

Resources used to produce goods, including land, labor, capital, and entrepreneurship.

Market Economy

An economic system where decisions about production and pricing are driven by supply and demand with minimal government intervention.

Command Economy

An economic system where the government makes all economic decisions regarding production and pricing.

Mixed Economy

An economic system that combines elements of market and command economies, allowing for both market-driven and government-directed sectors.

Gross Domestic Product (GDP)

The total value of all final goods and services produced within a country’s borders in a certain time period.

Nominal GDP

GDP measured using current prices, not adjusted for inflation.

Real GDP

GDP adjusted for inflation, reflecting the true economic growth.

GDP Per Capita

GDP divided by the population, indicating economic output per person.

Unemployment Rate

The percentage of the labor force actively seeking work but unable to find a job.

Labor Force

People who are employed or actively seeking employment.

Inflation

The increase in the general price level of goods and services over time, decreasing purchasing power.

Consumer Price Index (CPI)

A measure of the average change in prices paid by consumers for a fixed basket of goods over time.

Demand-Pull Inflation

Inflation occurring when aggregate demand exceeds aggregate supply.

Cost-Push Inflation

Inflation caused by an increase in the cost of production, raising goods and services prices.

Monetary Policy

Actions taken by the central bank to control the money supply and interest rates to influence economic activity.

Fiscal Policy

Government use of taxes and spending to influence the economy.

Business Cycle

The recurring pattern of expansion and contraction in economic activity.

Medium of Exchange

A function of money that facilitates buying goods and services.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Exports

Goods and services sold to other countries.

Imports

Goods and services purchased from other countries.

Balance of Trade

The difference between the value of a country's exports and imports.

Economic Growth

The increase in a country's output of goods and services over time.

Law of Demand

As the price of a good increases, the quantity demanded decreases.

Law of Supply

As the price of a good increases, the quantity supplied increases.

Market Equilibrium

The point where quantity supplied equals quantity demanded.