AP Macroeconomics
College Board Advanced Placement Macroeconomics covering all six CED units: basic economic concepts, indicators and the business cycle, national income and price determination, the financial sector, long-run stabilization policy, and the open economy. Includes the AD-AS model, monetary and fiscal policy, exchange rates, and post-COVID Fed policy context.
Ämne: Ekonomi · Nivå: Gymnasium (16–19) · 445 kort
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- Scarcity is the fundamental economic problem: human wants are unlimited but resources are limited, forcing every society to make choices about what to produce.
- Opportunity cost is the value of the next-best alternative given up when making a choice. It applies to all decisions, not just monetary ones.
- The four factors of production are land (natural resources), labor (human effort), capital (machines, tools, buildings), and entrepreneurship (organizing the other factors and bearing risk).
- Microeconomics studies individual decision-makers (households, firms, markets); macroeconomics studies the economy as a whole (GDP, unemployment, inflation, growth).
- The Production Possibilities Curve (PPC) shows the maximum combinations of two goods an economy can produce with fixed resources and technology. Points on the curve are efficient; inside are inefficient; outside are unattainable.
- A bowed-out (concave) PPC reflects the law of increasing opportunity cost: resources are not equally productive in all uses, so reallocating them costs more output of the other good.
- Economic growth shifts the PPC outward. Sources: more resources (labor force, capital stock), better technology, improved human capital, or stronger institutions.
- Absolute advantage means producing more of a good with the same resources than another producer. Comparative advantage means producing a good at a lower opportunity cost.
- Mutually beneficial trade occurs when two parties specialize according to comparative advantage and trade at terms-of-trade between their respective opportunity costs.
- The law of demand states that, ceteris paribus, as the price of a good rises the quantity demanded falls (downward-sloping demand curve).
- The law of supply states that, ceteris paribus, as the price of a good rises the quantity supplied rises (upward-sloping supply curve).
- Market equilibrium occurs where quantity demanded equals quantity supplied. At higher prices a surplus develops; at lower prices a shortage develops.
- Demand shifters (non-price): income, prices of related goods (substitutes, complements), tastes, expectations, number of buyers. A change in price moves you ALONG the curve; other factors SHIFT it.
- Supply shifters (non-price): input prices, technology, taxes/subsidies, expectations, number of sellers, weather/natural events. Price changes movement along the curve only.
- Consumer surplus is the area between the demand curve and the price paid — the difference between what consumers are willing to pay and what they actually pay.
- Producer surplus is the area between the supply curve and the price received — the difference between the minimum price sellers would accept and what they actually receive.
- Allocative efficiency occurs when goods are produced at quantities that reflect society's marginal benefit and marginal cost — the equilibrium quantity where MB = MC.
- Circular flow model: households supply factors of production (labor, capital) to firms via factor markets, and firms supply goods/services to households via product markets. Money flows in the opposite direction of goods.
- Marginal analysis: rational decision-makers compare the additional (marginal) benefit and additional (marginal) cost of an action. Continue an activity while MB ≥ MC.
- Normative economics involves value judgments about what ought to be (e.g., "the minimum wage should be raised"). Positive economics describes what is and can be tested empirically.
- Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country's borders during a specific period, typically a year.
- Expenditure approach: GDP = C + I + G + (X − M), where C = consumption, I = gross private investment, G = government spending, X = exports, M = imports.
- Income approach: GDP = wages + rent + interest + profit (plus statistical adjustments). It must equal expenditure GDP because every dollar spent is a dollar received as income.
- GDP excludes: intermediate goods (to avoid double counting), used goods, financial transactions (stocks, bonds), transfer payments (Social Security, welfare), illegal market activity, and unpaid household work.
- Nominal GDP uses current-year prices and reflects both real output and price changes. Real GDP uses base-year prices and isolates changes in physical output by holding prices constant.
- Real GDP = (Nominal GDP / GDP deflator) × 100. The GDP deflator is a price index that measures the average price of all goods and services included in GDP.
- GDP per capita = Real GDP / population. It is a better measure of average living standards than total GDP because it accounts for population size.
- GDP limitations: does not capture income distribution, quality of life, environmental degradation, household production, leisure time, the underground economy, or whether output benefits citizens broadly.
- The four phases of the business cycle are expansion, peak, contraction (recession), and trough. A recession is conventionally defined as two consecutive quarters of negative real GDP growth.
- The unemployment rate = (number unemployed / labor force) × 100. The labor force = employed + unemployed. Only those actively seeking work in the past four weeks count as unemployed.
- Labor force participation rate = (labor force / working-age population) × 100. It excludes discouraged workers and those not seeking work, so it can fall even when unemployment falls.
- Frictional unemployment: short-term, results from workers transitioning between jobs or entering the labor market. Always exists and is considered healthy.
- Structural unemployment: results from a mismatch between worker skills and the skills employers need, often due to technology change, automation, or shifts in industry.
- Cyclical unemployment results from a downturn in the business cycle (recession). It is the only type that disappears at full employment.
- The natural rate of unemployment equals frictional + structural unemployment. It represents full employment — cyclical unemployment is zero. Typically estimated at around 4–5% in the US.
- Inflation is a sustained increase in the general price level. Deflation is a sustained decrease. Disinflation is a slowdown in the inflation rate (still positive but falling).
- The Consumer Price Index (CPI) measures the price of a fixed market basket of goods and services purchased by a typical urban household. Inflation rate = (CPI₂ − CPI₁) / CPI₁ × 100.
- Demand-pull inflation: too much spending chasing too few goods — aggregate demand rises faster than aggregate supply. Often summarized as "too much money chasing too few goods."
- Cost-push inflation: rising input costs (oil shocks, wage increases, supply chain disruption) shift short-run aggregate supply left, raising price level and lowering output simultaneously.
- Hyperinflation is extreme inflation (typically over 50% per month). Historical examples: Weimar Germany 1923, Zimbabwe 2008, Venezuela 2017–2019. It destroys money's store-of-value function.
- Losers from unexpected inflation: lenders at fixed rates, savers, workers with fixed wages, those on fixed incomes (e.g., some pensioners). Winners: borrowers paying back with cheaper dollars.
- CPI limitations: substitution bias (consumers shift to cheaper substitutes), quality changes, new goods introduction, outlet bias. These tend to overstate true inflation.
- Post-COVID US inflation peaked at 9.1% in June 2022 (highest in 40 years), driven by supply chain disruptions, stimulus-fueled demand, and energy prices. By late 2023 it had cooled to roughly 3%.
- The U-3 unemployment rate is the headline measure. U-6 is broader, including discouraged workers and those working part-time for economic reasons. U-6 is typically much higher than U-3.
- GDP gap = actual GDP − potential GDP. A negative gap (recessionary) means actual output is below potential; positive gap (inflationary) means actual exceeds sustainable output.
- Aggregate demand (AD) shows the total quantity of goods and services demanded in an economy at each price level. AD = C + I + G + (X − M). The curve slopes downward.
- AD slopes downward due to three effects: (1) wealth/real-balances effect, (2) interest-rate effect (higher price level raises money demand and interest rates), (3) net-export effect (US prices rise relative to foreign).
- AD shifters: changes in C (consumer confidence, wealth, taxes), I (interest rates, business expectations), G (fiscal policy), or NX (foreign incomes, exchange rates). Price-level changes move along AD, not shift it.
- Short-run aggregate supply (SRAS) slopes upward because some input prices (especially nominal wages) are sticky in the short run; firms expand output when prices rise faster than costs.
- Long-run aggregate supply (LRAS) is vertical at the full-employment level of output (potential GDP). In the long run, all prices and wages adjust, so output depends only on real factors (resources, technology).