AP Macroeconomics Monster Vocab #1

Profit

Income for management

Nominal GDP

GDP measured at current market prices

Inflation Rate

The rate at which the price level is increasing [(New CPI - Old CPI) / Old CPI] x 100

Equilibrium Quantity

Where Q(s) and Q(d) are equal at a given price

Determinants of Demand

Factors that can shift the demand curve; - Change in: income, consumer attitude, population, substitute good's price, and complementary good's price (Put all 5)

Exports

Spending by foreign sector on current year final domestic goods/services

Land

Natural resources in population

Working Age Population

# of people ages 16+

Law of Demand

As price goes up, Q(d) goes down. As price goes down, Q(d) goes up

Unemployed

People not classified as employed but available for work & submitted a job application in the last 4 weeks

Civilian Labor Force

# of people classified as either employed or unemployed (military/institutionalized excluded)

Population

Total # of people in a country

Inputs

Resources used in making stuff (land, labor, capital, management) OR factors of production

Income Approach to Measuring GDP

Measures GDP by adding up all income earned in production (rent, wages, interest, profit)

Actual Unemployment Rate

(# of people classified as unemployed/civilian labor force) x 100

GDP Deflator

An all inclusive price index used to deflate nominal GDP (remove effect of inflation) to find Real GDP; GDP deflator = (nominal GDP/Real GDP) x 100

Consumer Price Index (CPI)

A market basket approach to measuring inflation. It estimates inflation for the average urban consumer. (current year market basket / base year market basket) * 100

Management/Entrepreneurship

Organizing the production of resources (willing to take risk)

Discouraged Worker

People previously classified as unemployed who exited the civilian labor force without finding employment

Capital (Physical)

Equipment used to produce goods/services

Imports

Current year spending by households, firms, and government on foreign produced goods (Both final and intermediate) and services

Investment

Spending by firms on new physical capital and inventories + spending by households on new construction of homes

Disinflation

A decrease in the inflation rate

Terms of Trade

Agreed-to exchange of goods at a given ratio that benefits everybody

Cyclical Unemployment

Joblessness caused by economic recession = Actual Unemployment Rate - NRU (Natural Rate of Unemployment)

Determinants of Supply

Factors that can shift the supply curve - Change in: price of resources, # of producers, technology, government intervention, and future expectations

Natural Unemployment Rate

Frictional rate of unemployment + Structural rate of unemployment. NRU occurs at full employment output -or- The absence of cyclical unemployment.

Employed

People who have worked at least 1 hour in the last 2 weeks (includes part time and full time employment).

Change in Supply

Shift in Q(s) at each price.

Capital Goods

Assets used to produce goods/services.

Equilibrium Price

Price where Q(d) equals Q(s).

GDP

Total value of all goods/services produced by a country in 1 year.

Interest

Income for borrowing capital.

Price Ceiling

Government-set maximum price.

Law of Supply

As price goes up, Q(s) goes up.

Inflation

An increase in price level -or- A decrease in the purchasing power of money

Complementary Goods

Goods used together

Consumption

Household spending on goods/services

Substitute Goods

Goods that can replace each other

Price Level

The average price of goods/services in the economy = CPI/100

Absolute Advantage

Ability to produce more than others

Labor

Human effort used in production

Change in Quantity Supplied

Movement along the demand curve b/c price change

Real GDP

Current year output at base year prices ; (Nominal GDP/GDP Deflator) * 100

Labor Force Participation Rate

(Civilian Labor Force / Working Age Population) * 100

Opportunity Cost

The cost you pay for a choice you make

Real Variables

Economic measures adjusted for inflation

Price Floor

Government-set minimum price

Wages

Income for labor

Capital Accumulation

Increase in capital stock over time, which makes PPC shift outwards

Shortage

Where Q(d) is greater than Q(s) at a given price

Production Possibilities Curve

Graph showing max output combinations given a certain amount of factors of production

Rent

Income for property ownership

Expenditure Approach to Measuring GDP

Measures GDP by totaling spending on final goods/services: GDP = C + I + G + (X - M)

Change in Quantity Demanded

Movement along the demand curve b/c price change

Government Spending

Spending by all levels of government on new capital goods, services, and infrastructure excluding transfer payments or interest payments on debt

Firm

Company

Surplus

Where Q(s) is greater than Q(d) at a given price

Marginally Attached Worker

People available for work within the last 12 months not classified as employed or unemployed

Structural Unemployment

Either a skill or geographic mismatch between individuals and available jobs

Deflation

A decrease in the price level -or- An increase in the purchasing power of money

Demand Schedule

Table showing Q(d) at each price

Frictional Unemployed

Voluntary job search and entry into the civilian labor force

Comparative Advantage

Ability to produce at a lower opportunity cost