Macroeconomics AP // Макроикономика

Economy

A system that coordinates choices about production with choices about consumption and distributes goods and services to the people who want them

Market economy

In which production and consumption are the result of decentralized decisions by many firms and individuals

Command economy

In which industry is publicly owned and there is a central authority making production and consumption decisions

Mixed Economy

An economic system combining private and public enterprise; capital is publicly owned, government oversees the economy

Capitalism

An economic system based on private ownership of capital; markets and prices determine the economy

Incentives

Rewards or punishments that motivate particular choices

Surplus

The amount of a product or service beyond what is required, above equilibrium prices

Property rights

Establish ownership and grant individuals the right to trade goods and services with each other, create many of the incentives in market economies

Marginal analysis

Analysis that involves comparing the marginal benefits and marginal costs

Resource

Anything (land, labor, capital, entrepreneurship) that can be used to produce something else; aka economic resources

Land resource

Resources found on the Earth (i.e. water, timber, minerals, etc.)

Labor resource

The time and effort of workers in the production process

Capital resource

Manufactured goods used to make other goods and services (i.e. machinery, buildings, tools, etc.)

Entrepreneurship resource

Risk taking, innovation, and the organization of resources for production

Resource scarcity

When there is not a great enough quantity of a resource to satisfy the various ways a society wants to use it; or for a limited supply of a resource, there is unlimited demand

Opportunity cost

The value of the next best alternative that you must give up when you make a particular choice

Microeconomics

Choices made by individuals, household, or firms - the small parts that make up the economy as a whole

Macroeconomics

The overall ups and downs of the economy, the explanations behind those fluctuations and how economic policy minimizes damage they cause

Economic aggregates

Economic measures such as the unemployment rate, the inflation rate, and gross domestic product, summarize data across many different markets

Positive economics

The branch of economic analysis that describes the way the economy actually works, "right" or "wrong" answer question

Normative economics

The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics

Reasons why economists disagree

1. Different core values held by economists 2. Different ways economic analysis is conducted (leading to different conclusions)

Market Equilibrium

A situation where no one would be better off doing something different; or the supply is equal to the demand

Business cycle

The alternation between economic downturns and upturns in the macroeconomy

Recession

Occasional economic downturns in the business cycle, output and employment fall

Expansions

AKA recoveries, periods in which output and employment are rising, economic upturns in the business cycle

Depression

A very deep and prolonged economic downturn

Employment

Total number of people who are currently working for pay; employment rates are ideally at 95% (full employment)

Unemployment

Total number of people who aren't currently employed but are actively seeking out a job; ideally unemployment rates are at 5%

Unemployment Rate

The percentage of the labor force (sum of unemployed and employed individuals) that are unemployed

Output

The quantity of goods and services produced

Aggregate Output

The economy's total production of goods, services within a time period (usually 1 year)

Inflation

Rise in general level of prices

Deflation

Fall in overall price level

Economic Growth

An increase in the maximum possible output of an economy (working at max efficiency)

Economic Models

Simplified version of reality used to better understand real-life situations in economics, not an actual economy, can be a graph, equation, simulation

Other Things Equal Assumption

Aka ceteris paribus, the assumption that factors other than those being considered do not change

Trade-off

When you give something up in order to obtain something else

Production Possibilities Curve (PPC)

A graph used by economists to understand trade-offs in a simplified economy that produces two goods, shows the combinations of two goods and services; maximum quantities of each good for every quantity produced of the other

Efficient

Best possible economy with no missed opportunities or making people worse off for others to be better, using all resources

Productive efficiency

When an economy is producing at a point on its PPC, using all economic resources

Allocative efficiency

When an economy allocates its resources so that consumers are as well off as possible

Trade

When people divide tasks among themselves and each person provides a good or service that other people want in return for different goods and services that he or she wants; getting what you want in exchange for what you produce best

Benefits of Trade

By dividing the tasks and trading with each other, two people can get more of they want than they could get by depending only on themselves

Specialization

When each person engages in a task that he or she is particularly good at performing

Comparative Advantage

Producing something if the opportunity cost of that production is lower for that individual than for other people (you lose less than others)

Terms of Trade

The rate at which one good can be exchanged for another

Absolute Advantage

When a person produces a good or service and can make more of it with a given amount of time and resources (you're more efficient than others)

Market

A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

Demand

How much consumers are willing to buy of something

Determinants of Demand

Factors other than price that motivate a consumer to purchase an item (individual tastes, preferences, wages, INEPT)

Law of Demand

The claim that, other things being equal, the quantity demanded of a good (demand) falls when the price of the good rises

Supply

Amount of a product offered for sale at all possible prices

Law of Supply

Tendency of suppliers to offer more of a good at a higher price, less of it as prices fall

Determinants of Supply

Factors other than supply that determine the quantities supplied (i.e. prices of resources and input, technology, tariffs or sanctions, PWIGNET)

Movement Along the Demand Curve

The change in quantity demanded at a given price, affected by a change in the price (think up, down the demand curve, different from a shift of the curve)

Shift of the Demand Curve

A change in the prices consumers are willing to pay (different from change in quantity demanded) affected by changes in income, preferences, consumer numbers, etc.

Movement Along the Supply Curve

A change in the quantity producers are willing to sell, affected by a change