Econ Exam Notes

Economics Definitions

  • Law of Demand:
    • Basic principle in economics.
  • Law of Diminishing Returns:
    • Important concept for AP Microeconomics.

Safety Net System

  • Social Security / FICA:
    • These terms refer to the same thing.

Key Economists and Concepts

  • Adam Smith:
    • Important figure in economics.
  • Incentives:
    • A motivating factor.
  • Invisible Hand:
    • A concept related to how markets function.

Basic Economic Concepts

  • Wants and Needs:
    • Distinction between what people desire and what they require.
  • Capitalism:
    • Economic system.
  • Socialism:
    • Economic system.
  • Money:
    • Three Uses / Six Characteristics: Essential to understand the functions and properties of money.
  • Fiat Money:
    • Government-issued currency that is not backed by a physical commodity.

Business and Market Concepts

  • Profit:
    • Financial gain.
  • Partnerships:
    • Business structure.
  • Market Equilibrium:
    • Where supply and demand meet.
  • Overpricing / Underpricing:
    • Deviation from market equilibrium.
  • Entrepreneur:
    • Someone who starts a business.
  • Shift in Demand:
    • Change in consumer desire for a product.

Macroeconomic Indicators

  • Gross Domestic Product (GDP):
    • Measure of a country's economic output.
  • GDP per capita:
    • GDP divided by population.
  • Nominal GDP:
    • GDP measured in current prices.
  • Real GDP:
    • GDP adjusted for inflation.

Property Rights

  • Property Rights:
    • Legal rights to own and use resources.
  • Physical Property:
    • Tangible assets.
  • Intellectual Property:
    • Intangible creations of the mind.
  • Copyright:
    • Legal protection for authors.
  • Patent:
    • Legal protection for inventions.

Labor Market

  • Unemployment / Underemployment:
    • Knowing the difference between these two.

Financial Markets

  • Financial Markets:
    • Venues where financial instruments are traded.
  • Stock Market:
    • Where shares of companies are bought and sold.
  • Bond Market:
    • Where debt securities are bought and sold.

Corporate Structures

  • Closely Held Corporation:
    • Corporation with few shareholders.
  • Publicly Held Corporation:
    • Corporation with shares traded on public exchanges.

Taxation

  • Taxation:
    • Progressive / Proportional / Regressive taxes.
    • Progressive: The percentage of income paid in taxes increases as income increases.
    • Proportional: The percentage of income paid in taxes is the same regardless of income level.
    • Regressive: The percentage of income paid in taxes decreases as income increases.
  • Federal Taxes:
    • Taxes collected by the federal government.
  • State Taxes:
    • Taxes collected by state governments.

Monetary Policy

  • Easy Money (Loose Monetary Policy):
    • Low interest rates.
  • Hard Money (Tight Monetary Policy):
    • High interest rates.
    • When interest rates are high, obtaining money is harder because you have to pay so much interest.