AP macroeconomics

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Gross domestic product

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41 Terms

1

Gross domestic product

total value of goods and services produced in the economy during a given period, usually a year

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2

Unemployment

the total number of people who are actively looking for work, but aren’t currently employed

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3

Inflation

a rise in overall price levels

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4

Utility

The want satisfying power of a good and service

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5

Economic resources

The land, labor, capital and entrepreneurial abilities that are used to produce goods or services

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6

factors of production

Economic resources (inputs) Land, capital, labor, entrepreneurship

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7

Land

natural resources used to produce goods or services

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8

Capital

Human made resources- machines, equipment-used to produce goods and services

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9

Labor

Physical and mental talents and efforts of people used to produce goods and services

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10

Entrepreneurship

Taking risks to create new enterprises (businesses); innovating to develop new products and production process

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11

Full employment

Use of all available resources, which satisfy human wants directly

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12

Capital goods

Goods that do not directly satisfy human wants

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13

Production possibilities curve (PPC)

Curve showing the combinations of 2 goods or services

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14

Oppertunity cost

What you must give up in order to get a product or choice

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15

Scarcity

Resources are in shot supply; Unlimited wants with limited resources

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16

Law of increasing opportunity cost

As the production of good increases the opportunity cost of producing an additional unit rises (vs. Constant)

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17

Economic growth

An outward shift in the PPC from an increase in quantity or quality or resources, or technological improvement; increase in GDP

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18

Pure capitalism

An economic system in which property resources are privately owned; markets and prices direct and coordinate economic activity

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19

Command economy

An economic system in which property resource are publicly owned; the government uses central ecnomic planning to direct economic atvites

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20

Mixed economy

An economic system in which has elements of a free market (private property) and command (govt. control)

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21

Market

Any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service

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22

Demand

Amount consumers are willing to buy

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23

Demand schedule

A chart showing the amounts of goods or services buyers wish to purchase at various prices during a time period

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24

Law of demand

The principle that an increase in a products price will reduce the quantity

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25

Demand curve

Line showing amount consumers desire of a certain good

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26

Diminishing marginal utility

In short term, people will derive less and less satisfaction for each additional unit of a good purchased

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27

Income effect

A change in the price of a consumer good changes a consumer’s purchasing power thus the quantity of the good purchased

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28

Substitution effect

A change in the price of a similar good changes the relative expensiveness of the good

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29

Determinants of demand

Factors other than price that indicate consumer choice

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30

Subsititue good

Products or services that can be used in place of each other; when the price of one falls so does the demand for the other

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31

Complimentary good

Products or services that can be used together; when the price of one falls the demand for the other increases (and vice versa)

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32

Supply

Amount producers are willing to sell

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33

Law of supply

Principal which states that an increase in the price of a product will increase the quantity of it supplied (or the opposite)

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34

Determinants of supply

Factors other than supply which determine the quantities supplied

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35

Surplus

The amount by which the quantity supplied exceeds the quantity demanded at a specific- above equilibrium - price

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36

Market equilibrium

An economic situation in which no individual would be better off doing something different; supply equal to demand

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37

Incentive

Something that motivates a person or group to act: reward

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38

Absolute advantage

When one can produce more with the same resources

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39

Comparative advantage

When one can produce more with a lower opportunity cost

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40

Specialization

When one concentrates on the activity one is better at doing

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41

Business cycle

The short-run alteration between economic downturns, known as rescissions, economic upturns, known as expansions

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