{
 "source": "https://peabody.kids/flashcards/tp-ap-macroeconomics",
 "id": "tp-ap-macroeconomics",
 "title": "AP Macroeconomics Key Terms",
 "category": "test-prep",
 "subject": "AP Macroeconomics",
 "levels": [
  "9-12",
  "college"
 ],
 "description": "GDP, inflation, unemployment, money, fiscal and monetary policy, and trade.",
 "tags": [
  "ap",
  "economics",
  "macro"
 ],
 "frontLabel": "Term",
 "backLabel": "Meaning",
 "cards": [
  [
   "Scarcity",
   "Limited resources against unlimited wants"
  ],
  [
   "Opportunity cost",
   "The value of the next best alternative given up"
  ],
  [
   "Production possibilities curve",
   "Graph of the maximum combos of two goods an economy can produce"
  ],
  [
   "Comparative advantage",
   "Producing a good at a lower opportunity cost"
  ],
  [
   "Absolute advantage",
   "Producing more of a good with the same resources"
  ],
  [
   "Gross domestic product",
   "Market value of final goods and services produced within a country in a year"
  ],
  [
   "Nominal GDP",
   "GDP measured at current prices"
  ],
  [
   "Real GDP",
   "GDP adjusted for price changes"
  ],
  [
   "GDP formula",
   "C + I + G + (X - M)"
  ],
  [
   "Consumption",
   "Household spending on goods and services"
  ],
  [
   "Investment",
   "Spending on capital goods, construction and inventories"
  ],
  [
   "Net exports",
   "Exports minus imports"
  ],
  [
   "Business cycle",
   "Alternating expansions and contractions in economic activity"
  ],
  [
   "Recession",
   "A significant decline in economic activity"
  ],
  [
   "Unemployment rate",
   "Percent of the labor force that is jobless and looking for work"
  ],
  [
   "Labor force",
   "People employed plus those actively seeking work"
  ],
  [
   "Frictional unemployment",
   "Short-term joblessness while changing jobs"
  ],
  [
   "Structural unemployment",
   "Joblessness due to a mismatch of skills and available jobs"
  ],
  [
   "Cyclical unemployment",
   "Joblessness caused by downturns"
  ],
  [
   "Natural rate of unemployment",
   "Sum of frictional and structural unemployment"
  ],
  [
   "Inflation",
   "A sustained rise in the general price level"
  ],
  [
   "Consumer price index",
   "Measures the cost of a typical basket of goods over time"
  ],
  [
   "Deflation",
   "A sustained fall in the general price level"
  ],
  [
   "Disinflation",
   "A slowdown in the rate of inflation"
  ],
  [
   "Real interest rate",
   "Nominal rate minus the inflation rate"
  ],
  [
   "Aggregate demand",
   "Total spending on domestic output at each price level"
  ],
  [
   "Aggregate supply",
   "Total output firms will produce at each price level"
  ],
  [
   "Short-run aggregate supply",
   "Upward-sloping because some prices and wages are sticky"
  ],
  [
   "Long-run aggregate supply",
   "Vertical at full-employment output"
  ],
  [
   "Wealth effect",
   "Spending changes as the value of assets changes"
  ],
  [
   "Multiplier",
   "The factor by which an initial spending change affects GDP"
  ],
  [
   "Marginal propensity to consume",
   "Share of extra income spent"
  ],
  [
   "Spending multiplier formula",
   "1 / (1 - MPC)"
  ],
  [
   "Fiscal policy",
   "Government spending and tax changes"
  ],
  [
   "Expansionary fiscal policy",
   "More spending or lower taxes to boost output"
  ],
  [
   "Contractionary fiscal policy",
   "Less spending or higher taxes to cool the economy"
  ],
  [
   "Automatic stabilizer",
   "Taxes and benefits that adjust with the economy without new laws"
  ],
  [
   "Budget deficit",
   "Spending exceeds revenue in a year"
  ],
  [
   "National debt",
   "Total accumulated borrowing"
  ],
  [
   "Crowding out",
   "Government borrowing raising interest rates and reducing private investment"
  ],
  [
   "Money",
   "Anything accepted as a medium of exchange"
  ],
  [
   "Functions of money",
   "Medium of exchange, unit of account and store of value"
  ],
  [
   "M1",
   "Currency, checkable deposits and similar liquid money"
  ],
  [
   "Fractional reserve banking",
   "Banks keep a part of deposits and lend the rest"
  ],
  [
   "Required reserve ratio",
   "Fraction of deposits banks must hold in reserve"
  ],
  [
   "Money multiplier",
   "1 / required reserve ratio"
  ],
  [
   "Excess reserves",
   "Reserves beyond what is required"
  ],
  [
   "Federal Reserve",
   "The US central bank"
  ],
  [
   "Federal funds rate",
   "Rate banks charge each other for overnight loans"
  ],
  [
   "Open market operations",
   "Fed buying or selling government securities to change reserves"
  ],
  [
   "Discount rate",
   "Rate the Fed charges banks for loans"
  ],
  [
   "Reserve requirement",
   "Fed rule on how much banks must hold in reserve"
  ],
  [
   "Expansionary monetary policy",
   "Lower interest rates and a larger money supply"
  ],
  [
   "Contractionary monetary policy",
   "Higher interest rates and a smaller money supply"
  ],
  [
   "Quantitative easing",
   "Large-scale asset purchases to lower long-term rates"
  ],
  [
   "Money market",
   "Graph of money demand and money supply determining the nominal interest rate"
  ],
  [
   "Loanable funds market",
   "Where savers supply funds and borrowers demand them, setting the real rate"
  ],
  [
   "Phillips curve",
   "Shows a short-run tradeoff between inflation and unemployment"
  ],
  [
   "Stagflation",
   "High inflation with high unemployment"
  ],
  [
   "Supply shock",
   "A sudden change in production costs that shifts aggregate supply"
  ],
  [
   "Economic growth",
   "Increase in real output over time"
  ],
  [
   "Productivity",
   "Output per unit of input"
  ],
  [
   "Human capital",
   "Skills and knowledge of workers"
  ],
  [
   "Physical capital",
   "Machines, buildings and tools"
  ],
  [
   "Rule of 70",
   "Years to double = 70 divided by the growth rate percent"
  ],
  [
   "Exchange rate",
   "The price of one currency in terms of another"
  ],
  [
   "Appreciation",
   "A currency gaining value"
  ],
  [
   "Depreciation",
   "A currency losing value"
  ],
  [
   "Balance of payments",
   "Record of a country's transactions with the world"
  ],
  [
   "Current account",
   "Trade in goods and services plus income flows"
  ],
  [
   "Capital account",
   "Flows of financial assets and investment"
  ],
  [
   "Tariff",
   "A tax on imports"
  ],
  [
   "Quota",
   "A limit on the quantity of imports"
  ],
  [
   "Trade deficit",
   "Imports exceed exports"
  ],
  [
   "Foreign exchange market",
   "Where currencies are traded"
  ],
  [
   "Laffer curve",
   "Idea that very high tax rates can reduce revenue"
  ],
  [
   "Recessionary gap",
   "Real GDP below full-employment output"
  ],
  [
   "Inflationary gap",
   "Real GDP above full-employment output"
  ],
  [
   "Self-correction",
   "Wages and prices adjusting over time to return to full employment"
  ],
  [
   "Supply-side economics",
   "Policies aimed at boosting production, such as tax cuts"
  ],
  [
   "Keynesian economics",
   "View that government spending can stabilize demand"
  ],
  [
   "Monetarism",
   "View stressing the money supply as key to inflation"
  ],
  [
   "Neutrality of money",
   "Money supply changes affect only prices in the long run"
  ],
  [
   "Velocity of money",
   "How often a unit of money changes hands in a year"
  ],
  [
   "Equation of exchange",
   "MV = PQ"
  ],
  [
   "Fisher effect",
   "Nominal interest rate rises one-for-one with expected inflation"
  ],
  [
   "Liquidity",
   "How easily an asset becomes cash"
  ],
  [
   "Transfer payment",
   "A payment with no good or service in return"
  ],
  [
   "Progressive tax",
   "Higher earners pay a larger share of income"
  ],
  [
   "Regressive tax",
   "Lower earners pay a larger share of income"
  ],
  [
   "Taylor rule",
   "A guide linking interest rates to inflation and output"
  ],
  [
   "Leakage",
   "Money leaving the circular flow: saving, taxes, imports"
  ]
 ]
}