Changes in Net Exports (X-M)
Exchange rates (if the US dollar depreciates relative to the Euro) National income
compared to abroad (if major importer has a recession.), (If the US has
a recession) If the US gets a cold, Canada gets pneumonia AD=GDP=C+I+
Aggregate Demand: added all together when we use aggregates, we combine all
prices and all quantities Is all the goods and services (real GDP) that buyers are willing
and able to purchase at
different price levels (accounts for everyone,
Product Quality: the CPI ignores both improvements and decline in product quality (CPI
suggest that prices stay the same through the economic well being has improved)
CPI vs. GDP Deflator
The GDP deflator measures the prices of all goods produced, wh
Inflation: the rising level of prices It reduces the purchasing power of money
When inflation occurs, each dollar of income will buy fewer goods than before
How Inflation is Measured The government tracks the prices of the same goods and
Temporarily unemployed or being between jobs Individuals are qualified workers with
transferable skills, but they arent working ex: high school or college graduates look for
a job; individuals that were fired and are
looking for a better job
Expenditure Approach (Four Components of GDP) Consumer Spending: (ex: $5 for
Little Caesars Pizza) Investments: When businesses put money back into their own
business (ex: machinery or
tools, CAPITAL GOODS) Government Spending: (ex: bombs and tanks) NOT s
Unit 2 Notes
What is Macroeconomics
Macroeconomics is the study of large economy as a whole. It is the study of the big
picture analyzes everyone (not just the consumer) study all business (not just one
The field of macroeconomics was born dur
3 Economic Questions
What goods and services should be produced? How should these goods and services
be produced? Who consumes these goods and services? (The way these questions are
answer determines the ECONOMIC SYSTEM) An economic system is the method
AP Economic Notes
Investment: money spent by BUSINESSES to improve their production Goods: physical
objects that satisfy needs and wants
Consumer Goods: created for direct consumption Capital Goods: created for indirect
consumer (most tools, helps you mak
AP Economic Notes
What is Economics in General?
Unit 1: Basic Economic Concepts
the science of scarcity Scarcity: the condition in which our wants are greater than our
limited resources (do not
confuse with shortage) the situation where peoples wants exc
1. (p. 341-343) Discuss tactics labor and management may use to gain their objectives.
One of the more effective weapons against management is the strike. In addition, picketing
can alert the public about the union's concerns regarding a c
1. (p. 343) Compulsory arbitration may occur when an outside party such as the federal government requests it to stop a prolonged strike that threatens to disrupt the economy. TRUE
AACSB: Reflective ThinkingBloom's Taxonomy: KnowledgeDifficulty: MediumLea
1. (p. 336) To motivate employees such as car salespersons to sell as much as they can, they are
paid A. commissions.B. time wages.C. piece wages.D. by units.E. the minimum.
AACSB: Reflective ThinkingBloom's Taxonomy: KnowledgeDifficulty: EasyLearning Obj
1. (p. 333) Downsizing is most likely the result of A. violations of company rules.B. excessive
absenteeism.C. frequent tardiness.D. efforts to increase productivity and competitiveness.
E. excellent work.
AACSB: Reflective ThinkingBloom's Taxonomy: Knowl
1. (p. 330-331) What is a performance appraisal?
A performance appraisal identifies an employee's strengths and weaknesses on the job. It is
one of the more difficult tasks of managers, yet it is very important.
AACSB: Reflective ThinkingB
Debit is funds leaving the domestic country Credit is funds entering
the domestic country
Foreign Exchange (aka FOREX)
The exchange rates are always changing
Exchange Rates In the FOREX market we only look at two countries/currencies at a
ex: US do
Unit 2 Notes: International Trade
Everyone specializes in the production of goods and services and trade it to others. Per
Unit Opportunity Cost
Ex: It costs you $50 to produce 5 t-shirts. what is you PER UNIT cost or each shirt?
($10 per shirt)
THE FEDERAL RESERVE
Three Shifters of Money Supply
Reserve Requirements (Ratios) Lending money to banks and thrifts (Discount rate)
Open market operations (buying and selling bonds/securities) the FED is chaired by
Unit 4 Notes
Bonds vs. Stocks
Bonds are loans or IOUs that represent debt that the government or a corporation must
repay to an investor.
The bond holder has NO OWNERSHIP of the company Stockowners can earn a profit
Dividends, which are portions of corporat
Unit 1 Notes
Why do we use money?
The Barter System: goods and services are traded directly. There is no money exchange Problems: Before trade could occur, each trader had to have something the other wanted Some goods cannot be split (1 goat for 5 chicke