ap macro units 1 and 2 10/15/24

normative

value-based, some subjectivity

positive

objective fact, statement of truth

agent

any entity that makes decisions

agent examples

households, firms, and governments

economics is the study of

production, distribution, and consumption

land resource

comes from natural world

labor resource

application of human efforts, mental or physical

capital goods

means of production, not immediately “used up” in production

entrepreneurship

firm ownership, business creation to make a profit

scarcity

resources are limited and cannot be used more than one way at a time

what is NOT an economic resource

money

micro vs macro

specific market/good vs whole economy

intermediate good vs final good

sheet of paper vs paper airplane

most economic theory can't explain

business cycle

keynes

founder of macro, interrelating economy's different parts

a market transaction has to be

reciprocal and voluntary

other words for distribute

allocate and ration

labor market

the reciprocal and voluntary exchange of labor power

core on capitalism

production in firms, institutions of private property, markets and firms, production through capital goods, economy is mixed with some government intervention

AP on capitalism

producer and consumer relationship, same thing as market economy, firms compete, consumer choice, most efficient system

wolff on capitalism

employer and employee relationship through exchange contract, NOT defined by private vs state enterprises as it mixes both, labor market differentiates it from other historical structures

ceteris parabus assumption

assuming everything else is constant, only allow the variables you are observing to vary

PPC may rise because of

economic growth, increases the maximum amount of production

PPC may fall because of

loss of life, war, reduction in resources

regulation, labor laws, etc.

change the curve as a whole rather than a separate point

flow variable

measures accumulation of something over a period of time

stock variable

quantity of something that exists at one point in time

when PPC is linear

opportunity costs are constant

input problem equation

opp cost of A = hrs to make A/hrs to make B

output problem equation

opp cost of A = amt of B/amt of A

terms of trade

price of exports/price of imports * 100

law of demand

price and Qd are inversely related

determinants of demand

change in consumer tastes, number of buyers, consumer incomes, prices of complementary and substitute goods, or consumer expectations

demand curve shifts when

the event happens out of the market of that good

law of supply

price and Qs have a direct relationship

determinants of supply

changes in cost of production, prices of other gods, producer expectations, and number of suppliers

any factor affecting both Qd and Qs is

price

expenditures approach

consumer spending, investment spending, government spending, exports - imports

income approach

labor wages, rent on land, interest, entrepreneurial profit

value-added approach

value of production - value of intermediate goods

gross domestic product

market value of final goods and services only, including capital goods, new infrastructure, and inventory changes

real gdp formula

(nominal gdp/price index)*100

labor force participation rate

labor force/ppl age 16 or older * 100

unemployment rate

# unemployed/labor force * 100

labor force

employed (including full and part time and underemployed) + unemployed

out of labor force

children, retirees, full-time students, not actively seeking work, institutionalized, discouraged workers

limitations of GDP

doesn’t include underground economy or things that don't occur in the market e.g. caregiving

limitations of unemployment rate

doesn't take into account underemployment, discouraged workers, or full time students who also work

limitations of CPI

doesn’t account for price changes due to quality improvements or subsitute goods

inflation rate

price index yr 2 - price index yr1 / price index yr 1 * 100

inflation

as prices rise, the purchasing power of money decreases

deflation

as prices fall, the purchasing power of money increases

disinflation

falling inflation rate between years