AP Macroeconomics Unit 1 Section 1 Vocabulary

For Mr. Howland's AP Macroeconomics

absolute advantage

when a producer can provide a good or service in **greater** quantity for the **same** cost, or the **same** quantity at a **lower** cost, than its competitors

capital (goods)

physical assets a company uses to produce goods and services for consumers

ceteris paribus (other things equal)

a shorthand indication of the effect one economic variable has on another, provided all other variables remain the same

command economy

a type of economy in which governments own the factors of production such as land, capital, and resources, and officials determine when, where, and how much is produced

comparative advantage

an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners

deflation

the general decline of the price level of goods and services

depression

a severe and prolonged downturn in economic activity; may be defined as an extreme recession lasting three+ years

economics

the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time

economy

the process or system by which goods and services are produced, sold, and bought in a country or region

efficient

achieving maximum productivity with minimum wasted effort or expense

entrepreneur

a person who organizes and operates a business or businesses, takes on greater than normal financial risks, conceives of the original idea, and makes decisions

incentive

generally, a motivator or form of encouragement; a payment or concession to stimulate greater output or investment

inflation

an economy-wide, sustained trend of increasing prices

labor

a force of production that refers to the work people do to produce goods and services, including all physical and mental efforts that go into production

labor force

the number of people who are either working or actively looking for work; all people capable of employment

land

a factor of production, similar to labor, as one of the crucial elements in creating goods and services; specifically a resource of raw materials

marginal analysis

an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity

macroeconomics

the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity

market economy

a type of economy utilizing private ownership as the means of production and voluntary exchanges/contracts; prices are set by supply and demand

microeconomics

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the part of economics concerned with single factors and the effects of individual decisions

model

a simplified description of reality, designed to yield hypotheses about economic behavior that can be tested

normative economics

a perspective on economics that reflects normative, or ideological, judgments toward economic development, investment projects, statements, and scenarios; what the economy ‘should’ be

opportunity cost

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the loss of potential gain from other alternatives when one alternative is chosen

output

quantity (or quality) of goods or services produced in a given time period, by an entity

positive economics

objective descriptions of economic phenomena; based on fact

production possibilities curve

measures the maximum output of two goods using a fixed amount of input

property rights

theoretical and legal ownership of resources, both tangible and otherwise, and how they can be used

resource

anything used to make something else, limited and desired to some degree

scarcity

the concept that all goods are to some degree limited, therefore scarce, requiring choices about how they are allocated

specialization

a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency

terms of trade

the ratio between a country's export prices and its import prices, used as an indicator of a country’s economic health

trade-off

the option we give up when making a choice between two opportunities

unemployment

a state of actively looking for or being capable of work, but not currently being employed