AP MACROECONOMICS VOCABULARY

PART ONE VOCABULARY

CHAPTER 1

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1. economics2. economic perspective3. marginal analysis4. scientific method5. theoretical economics6. principles7. generalizations8. other-things-equal assumption9. policy economics

10. tradeoffs11. macroeconomics12. aggregate13. microeconomics14. positive economics15. normative economics16. fallacy of composition17. “after this, therefore because of

this.” Fallacy

CHAPTER 1 APPENDIX

1. horizontal axis2. vertical axis3. direct relationship4. inverse relationship

5. independent variable6. dependent variable7. slope of a straight line8. vertical intercept

CHAPTER 2

1. economizing problem2. utility3. economic resources4. land5. capital6. investment7. labor8. entrepreneurial ability9. factors of production10. full employment11. full production12. productive efficiency13. allocative efficiency14. consumer goods

15. capital goods16. production possibilities table17. production possibilities curve18. opportunity cost19. law of increasing opportunity

costs20. economic growth21. economic system22. market system23. capitalism24. command system25. resource market26. product market27. circular flow model

CHAPTER 3

1. Market2. demand

3. demand schedule

4. law of demand5. diminishing marginal utility6. income effect7. substitution effect

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8. demand curve9. determinants of demand10. normal goods11. inferior goods12. substitute good13. complementary good14. change in demand

15. change in quantity demanded16. supply17. supply schedule

18. law of supply19. supply curve20. determinants of supply21. change in supply22. change in quantity supplied23. surplus24. shortage25. equilibrium price26. equilibrium quantity27. rationing function of prices

CHAPTER 4

1. private property2. self-interest3. competition4. roundabout production5. specialization6. division of labor7. medium of exchange

8. barter9. money10. economic costs11. normal profit12. economic profit13. consumer sovereignty14. dollar votes

CHAPTER 5

1. durable goods2. nondurable goods3. plant4. firm5. industry6. sole proprietorship7. partnership8. corporation9. stocks10. bonds11. limited liability12. double taxation

13. monopoly14. spillover costs15. exclusion principle16. public goods17. free-rider problem18. quasi-public goods19. transfer payments20. personal income tax21. corporate income tax22. sales and excise taxes23. property taxes24. fiscal federalism

CHAPTER 6

1. multinational corporations 2. comparative advantage

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3. terms of trade4. foreign exchange market5. exchange rates6. depreciation7. appreciation8. protective tariffs9. import quotas10. nontariff barriers11. export subsidies12. Smoot-Hawley Tariff Act

13. Reciprocal Trade Agreements Act14. Most-favored-nation clauses15. General Agreement on Tariffs and

Trade (GATT)16. World Trade Organization (WTO)17. European Union (EU) 18. Euro19. North American Free Trade

Agreement (NAFTA)

PART TWO VOCABULARY

CHAPTER 7

1. national income accounting2. gross domestic product (GDP)3. intermediate goods4. final goods5. multiple counting6. value added7. expenditures approach8. income approach9. personal consumption expenditures

(C)10. gross private domestic investment

(Ig)11. net private domestic investment

12. government purchases (G)13. net exports (Xn)14. national income15. indirect business taxes16. consumption of fixed capital17. net domestic product (NDP)18. personal income (PI)19. disposable income (DI)20. nominal GDP21. price index22. real GDP23. consumer price index (CPI)24. per capita output

CHAPTER 8

1. economic growth2. rule of 703. productivity4. business cycle5. peak6. recession7. trough8. recovery9. labor force10. unemployment rate

11. discouraged workers12. frictional unemployment13. structural unemployment14. cyclical unemployment15. full-employment rate of

unemployment16. natural rate of unemployment

(NRU)17. potential output18. GDP gap

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19. Okun’s law20. inflation21. demand-pull inflation22. cost-push inflation23. per-unit production costs24. nominal income25. real income

26. anticipated inflation27. unanticipated inflation28. cost-of-living adjustments (COLA)29. real interest rate30. nominal interest rate31. deflation32. hyperinflation

CHAPTER 9

1. break-even income2. average propensity to consume

(APC)3. average propensity to save

(APS)4. marginal propensity to

consume (MPC)

5. marginal propensity to save (MPS)

6. wealth effect7. real interest rate8. 45 º line9. leakage10. injection

CHAPTER 10

1. multiplier2. net exports3. lump-sum tax

4. balanced budget multiplier5. recessionary gap6. inflationary gap

CHAPTER 11

1. aggregate demand-aggregate supply (AD-AS) model

2. aggregate demand3. real-balances effect4. interest-rate effect5. foreign purchases effect6. determinants of aggregate

demand7. aggregate supply

8. horizontal range (of AS curve)

9. intermediate range (of AS curve)

10. vertical range (of AS curve)11. determinants of aggregate

supply12. productivity13. equilibrium price level

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14. equilibrium real output15. efficiency wages

16. menu costs

CHAPTER 12

1. fiscal policy2. Employment Act of 19463. Council of Economic Advisers

(CEA)4. expansionary fiscal policy5. budget deficit6. contractionary fiscal policy7. budget surplus8. built-in stabilizer

9. progressive tax system10. proportional tax system11. full-employment budget12. cyclical deficit13. political business cycle14. crowding-out effect15. net export effect16. supply-side fiscal policy

PART THREE VOCABULARY

CHAPTER 13

1. medium of exchange2. unit of account3. store of value4. M1, M2, M35. token money6. Federal Reserve Notes7. checkable deposits8. commercial banks9. thrift institutions10. near-monies11. savings account12. money market deposit account

(MMDA)13. time deposits

14. money market mutual fund (MMMF)

15. legal tender16. transactions demand17. asset demand18. total demand for money19. money market20. Federal Reserve System21. Board of Governors22. Federal Open Market Committee

(FOMC)23. Federal Reserve Banks24. electronic transactions

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CHAPTER 14

1. balance sheet2. fractional reserve system3. vault cash4. required reserve5. reserve ratio

6. excess reserves7. actual reserves8. Federal funds rate9. monetary multiplier

CHAPTER 15

1. monetary policy2. open-market operations3. reserve ratio4. discount rate5. easy money

6. tight money7. velocity of money8. cyclical asymmetry9. Federal funds rate10. prime interest rate

AP MACROECONOMICS

CHAPTER 16

1. short run2. long run3. short-run aggregate supply curve4. long-run aggregate supply curve5. Phillips Curve6. stagflation

7. aggregate supply shocks8. long-run vertical Phillips Curve9. disinflation10. supply-side economics11. Lafer Curve

CHAPTER 18

1. public debt2. U.S. securities3. annually balanced budget4. cyclically balanced budget

5. functional finance6. social security trust fund7. external public debt8. public investments

PART NINE VOCABULARY

CHAPTER 37

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1. principle of comparative advantage

2. terms of trade3. gains from trade4. world price

5. equilibrium world price6. tariffs7. nontariff barrier (NTB)8. dumping9. World Trade Organization (WTO)

CHAPTER 38

1. balance of payments2. current account3. trade deficit4. trade surplus5. balance on current account6. capital account7. official reserves

8. flexible- or floating- exchange-rate system

9. fixed exchange-rate system10. purchasing-power-parity theory11. gold standard12. devaluation13. Breton Woods system14. International Monetary Fund (IMF)

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