Christiana's AP Macroeconomics Blog

Inflation -Reduces the purchasing power of money (Ex: Gas price increase from 1982 to 2018 from $.63 to ~$3) *When inflation occurs, each $ of income will buy fewer goods than before Natural Rate: 2-3% Causes: Gov't prints too much money Gov't that keeps printing money to pay debt end up w/ hyperinflation condition Demand-pull Inflation Too many $$ chasing too few goods Demand pulls of prices Cost-push Inflation Higher production costs increases prices (Ex: Hurricanes) Unexpected  (unanticipated) Inflation Hurt by Inflation Helped by Inflation * Lenders/ Creditors (locked into fixed rate * Fixed Income    (Social Security, Unemployment) * Savers      Debtors/Burrowers Flexible income A business where price of product increases faster than the price of resources Nominal Interest Rate- unadjusted cost of burrowing or lending money Real IR +...

Household - a person or a group of people who share an income Firm(s) - organization that produces goods and services for sale Factor (Resource) Market - market in which the factors of production are bought by firms and sold by households (Ex: Organization buying from another        hiring source of labor) Product Market - where goods and services are bought and sold (Ex: student buying burger) Mode l: Hong Kong - true free market w/ regulations             Foreign Expenditure           U.S Imports      ↓               ↑                    ↓              ...

Unemployment - failure to use available resources, particularly labor, to produce desired goods and services                 * Rate -# of unemployed                              --------------------- X 100                               total labor force                       (# of unemployed + employed)             Frictional            - Temporarily unemployed or "in-between" jobs     ...

                                                   GDP, Real GDP and Nominal GDP Gross Domestic Product Total market value of all final goods and services produced within a country's borders, within a given year GDP = C + Ig + G + Xn (Expenditure approach) C: Personal Consumption Expenditures (67%)   *Durable and nondurable Ig: Gross private domestic investment    *New factory equipment    * Factory equipment maintenance    * Construction of housing    *Unsold inventory of products built in a year G: Gov't pending Xn: Net exports     *Exports - Imports     Does NOT include    *Used or second-hand goods (voids...

Business Cycles --Fluctuation in economic activity that an economy experiences over a period of time -1 cycle from trough to trough -Avrg. Cycle is 5-7 yrs -Recession lasts ~ 14 months -Peaks & Troughs are meaningless b/c we never know we are in one until its over - Trough: end of a recession -if recession loses >10% of real GDP, then it is a depression Expansion - period of high (real) GDP and high employment Peak - highest point just before the unemployment rate rises Contraction - ( Recession ) real GDP decreases in a contraction period ad unemployment rises Trough -   our lowest point (often called depression)  

Supply   *For Company * -the quantities that producers or sellers are wiling and able to sell at various prices Curve:  Schedule: Price ↑   Quantity ↑   Price ↓ Quantity ↓ *Plot ONLY points given * ↑   supply - curve shifts right * ↓Supply - curve shifts left Law of Supply - there is a direct relationship bet. price and quant. Supplied (QS) (therefore ∆ in QS is caused by ∆  in price) Determinants for ∆  in Supply * ∆ in # of sellers * ∆ in cost of production * ∆   in tech. * ∆   in weather * ∆ in taxes or subsidies * ∆  in expectations (future) Cost of Production Total Revenue : P x Q   (Price X Quantity) Fixed Cost : A cost that does NOT change no matter how much of a good is being produced (Ex: Mortgage, Insurance, Salary) Variable Cost:   Cost that rises and falls depending upon how much is produced ] (Ex: electricity) Marginal Cost: cost of producing one more additional of a good ...