AP Macro Unit 1 Review Topics

Economics

The social science concerned with the efficient use of limited or scarce resources to achieve maximum satisfaction of human material wants

Economizing problem

Humans wants are unlimited, resources are limited

Scarcity and Choice

Resources can only be used for one purpose at a time, scarcity requires that choices be made

Opportunity Cost

the value that must be given up (sacrificed) to obtain it

Factors of Production

Land, labor, capital, entrepreneurship

Marginal Benefit

The additional benefit or value gained from consuming or producing one more unit of a good or service

Marginal Cost

The economic cost to produce one additional unit of a good or service

Abstractions

Economic principles, theories, or models are abstractions, simplifications which attempt to find the important connections and relationships of economic behavior

8 Economic Goals

1. Economic Growth

2. Full Employment

3. Economic Efficiency

4. Price level stability

5. Economic Freedom

6. Equitable distribution of income

7. Eoconmic Security

8. Balance of trade

Trade deficit

Your country buys more products from foreign countries than foreigners purchase from you (america)

Trade surplus

Your country sells more goods to foreign countries than you buy from them

Fiscal budget

What a government earns in taxes and spends

Fiscal deficit

The government spends more than it takes in in taxes

Fiscal surplus

The government earns more in taxes than it spends

Adam Smith

The Wealth of Nations (1776)-invisible hand of economics/capitalism (laissez faire economics)

PPC

Points 3 & 4 are efficient, point 1 is inefficient, point 2 is impossible

Increasing OC-PPC

Decreasing OC-PPC

Constant OC-PPC