Kayla's AP Macroeconomics Blog

Aggregate Demand curve: -AD is demanded by consumers, businesses, government, and foreign countries -Changes in price level move along curve not shifts on curve Aggregate Demand (AD): Shows amount of real GDP that private, public, and foreign sector collectively desire to purchase at each possible price level ; The relationship between the price level and the level of real GDP is inverse 3 Reasons Why AD is downward sloping: Wealth Effect: higher prices reduce purchasing power of $, decreases quantity of expenditures, lower price levels increase purchasing power and increase expenditures ; ex: price level goes up, gdp demand goes down Interest-Rate Effect: as price level increase, lenders need to charge higher interest rates to get REAL return on their loans, higher interest rates discourage consumer spending and business investment ; ex: increase in price leads to increase in interest rate from 5% to 25%. Less likely to take out loans to improve business Foreign T...

Unemployment: Failure to use available resources, particularly labor, to produce desired goods and services Population: # of people in a country Labor Force: # of people in a country that are classified as either employed or unemployed Employed: 16 y/o or older and have a job; must work at least one hour every two weeks Unemployed: 16 y/o or older and no job; actively search for job last two weeks Not in Labor Force: Kids, Mental Institutionalize, Inconcerated-Prison, Disabled, Retirees, Military Force, Homemakers (stay at home parent/s) Unemployment Rate Formula: # of unemployed / total labor force × 100 Discouraged Workers: workers who has given up after searching Total Labor Force Formula: # of unemployed + # of employed 4 Types of Unemployment: Frictional: temporarily unemployed or in between jobs; qualified workers with transferable skills Structural: changes in structure of labor force makes some skills obsolete; workers don't hav...

Real GDP: Price x Quantity ; value of output produced in constant based year prices that is adjusted for inflation. Can increase from year to year only if output increases. Nominal GDP: Price x Quantity ; value of output produced in current year prices. Can increase from year to year if either prices or output increases In the base year, current prices is equal to base year (constant) prices In years after the base year, nominal GDP exceeds real GDP In years before the base year, real GDP exceeds nominal GDP GDP Inflator: a price index used to adjust from nominal to real GDP In the base year, the GDP deflator = 100 For years after the base year, GDP Deflator > 100 For years before the base year, GDP Deflator < 100 Deflator Formula: new-old/old GDP Deflator = (nominal GDP/real GDP x 100) Inflation: a general rise in the price level (new[price index]-old[price index] /old x 100) will result in percentage Consumer Price Index: measures cost of ...

Household- person or group of people who share income Firms- organization that produces goods and services for sale Factor or Resource Market- this is the market where factors of production is sold, bought by firms and sold by households Product Market- market where goods and services are bought and sold GDP: total market value of all final goods and services produced within a country's borders within a given year GNP (gross national product) : measure of what it's citizens produce and whether they produce these items within its borders (international) What's not included in GDP: Used or Second Hand Goods, Intermediate Goods- require further processing before they are ready for final use, Gifts or Transfer Payments (public vs private) : no output produced and recipients don't contribute to current production, Public : welfare social security or Private: scholarship, Unreported Business Activities (tips), Illegal Activities (drugs), Stocks and Bonds (n...

Price Ceiling - legal maximum price meant to help BUYERS (excess demand) Lower prices for some consumers (ex: rent control) Shortages Long line for buyers Illegal sells above equilibrium price Price Floor - legal minimum price meant to help SELLERS (excess supply) Higher product prices Surplus Higher taxes Waste

Movements of ppg Inside of curve : any point inside (unemployment, underemployment, famine, war, recession, depression) Along the curve : on the curve Shifts of the curve : can shift inside or outside the curve Opportunity cost : next best alternative that you must give up in order to get something, form of trade-off Law of increasing opportunity costs : as you produce more of one good (the far gone production of another good), will increase Concave (bowed out) vs Constant (same, straight line) ppg Productive efficiency : (Products are being produced in the least costly way, any point on the ppg) vs Allocative efficiency : (Products being produced are ones that are most desired by society) Elasticity of Demand - Measure of how consumers react to a change in price Inelastic Demand (demand for a good will not change, or will change very little regardless of price. Ex: soap, water, gas, insulin), Elastic Demand (demand will change greatly given a small change in p...

Positive : facts; claims that attempt to describe world as is; very descriptive. Ex: minimum wage laws cause unemployment Normative : opinions; claims that attempt to prescribe how world should be. Ex: government should raise minimum wage Wants : desires of the citizens Needs : basic requirements for survival Scarcity : problem unlimited wants and needs with limited resources; fundamental problem that all societies face Shortage : quantity demanded > quantity supplied Surplus : quantity supplied > quantity demanded Factors of Production : Capital - human: knowledge and skills workers gain through education and experiences // physical: human made objects used to create other goods and services Entrepreneurship - risk taker and innovative Land - natural resources Labor - work exhorted Production Possibilities Graphs (PPG, PPC, PPF): shows alternate ways to use resources, shows most that society can produce if it uses every available resource to bes...