ap宏观经济学知识点
AP宏观经济学复习知识点
Macro Econ
1 macroeconomics: branch of economics that focus on economy as a whole
2 microeconomics: branch of economics that analyze individual markets
GDP
3 GDP per capita: GDP/population. A measurement of living standard.
4 GDP=C+I+G+NX
5 consumption:
(a)only final good counts: any intermediate good are not counted to prevent double count
(b) Resale is not counted: people know they can resale it later so the value of that good is not as high as the price shows.
(c) Transaction without money does not count
(d) Underground economy does not count
investment: purchase of equipment, new construction and unsold inventories(存货)
Government spending: all spending on goods or services, does not count welfare. Sometimes it can over state quality of life as some spending does not create so much utility.
Net export: export: produced but not consumed in a country, does not matter if a foreigner produces them. Import: consumed but not produced in a country.
GDP can be an overstatement of life if negative externality exists. It can be an understatement of life
GDP= wages +rent +interest +profit
Inflation
6 inflation: an increase in the overall price level=decrease of purchase power of currency
7 when increasing money supply, real wealth shifts to money maker
8 Money neutrality: a pone time change in money supply will have no real effect in the long run.
9 Shoe leather costs: the effort made to decrease the effect of inflation. Like withdrawing money to purchase real good.
10 Menu costs: cause of price stickiness. There is cost to change price so company will not change price immediately until MB>MC
11 contract: cause of wage stickiness, usually for a year
12 Rational expectation: people expect inflation and act accordingly. The average error of expectation is zero.
13 GDP deflator: one way to calculate inflation: divide nominal GDP by real GDP and multiply by 100.
14 CPI: takes a fixed basket of good and calculate their price 15. CPI vs. GDP deflator: CPI only looks at consumer goods. Also people tend to buy less of one thing if price increases so CPI is not accurate. A common problem for both ways is that they do not take into account the quality. A good with better quality now is still counted the same as before. 16. Deflation: inflation is negative. It is very harmful as interest rate can not be lower than zero.
Unemployment
15 people employed/total labor force=unemployment rate
16 those not looking for a job, too young and prisoner or patient are not counted in labor force
17 Discouraged worker: people who give up looking for a job. More discouraged workers can increase employment rate.
18 Types of unemployment: seasonal, structural, frictional and cyclical. Seasonal, structural and frictional are unavoidable so no cyclical unemployment means full employment, or natural rate of unemployment.
19 effect of unemployment: lower output(Okun’s law: for every percent of unemployment higher than natural rate, GDP is 2percent lower than potential), stress, workers loses skill, send a bad signal to employer
20 Bias about unemployment: the leisure people experience when not having a job decrease the negative effect of unemployment. However, the life is stressful and people may spend some of the time looking for a job and these factors make things worse.
Aggregate demand egate demand
21 AD: total expenditure in a country
22 AD is downward sloping because:
(a)wealth effect: the higher the price level, the less you can buy with a fixed amount of money
(b) interest rate effect: higher price level—carry more money—less savings—higher interest rate—lower investment
(c) Exchange rate effect: higher price level—carry more money—less savings—higher interest rate—appreciate currency—more import and less export
3. Shifts of AD: changes in expectations, animal spirit (confidence), change in money supply, fiscal policy
Aggregate supply
23 Aggregate supply: total supply. The long run AS curve is vertical, only affected by change in resources and technology. Short run AS is upward sloping. 24 AS is upward sloping because:
(a)sticky price: lower price level and same nomial price—more real price—less demand--less supply
(b) Sticky wages: lower price level and same wage—more real wage—higher cost—produce less (sticky wages may caused by money illusion, labor contracts, labor regulation and union power)
3. Shifts of AS: real factors of production will cause both LRAS and SRAS to shift. Expectations and change in price or wages will cause SRAS to shift.
4. Demand pull inflation: increase in AD (may caused by increase in money supply or fiscal stimulus)—decrease in AS—equilibrium and higher price level
5. Cost push inflation: decrease in AS—increase in AD—equilibrium and higher price level
6. Inflation gap: AD increases and the gap between the SR and LR level of output is inflation gap.
7. Recessionary gap: AD decreases and the gap between SR and LR level of output is recessionary/output gap
Supply side economics
25 Supply side economics tend to solve problem in macroeconomics by changing AS. They would agree a cut of tax if it can increase people’s incentive to work. So they do not agree a fund back of last year’s tax.
26 Laffer curve: when tax rate is higher than a number, tax revenue may decrease when government increases tax rate because the decrease in efficiency is so great.
What is money
27 uses of money: medium of exchange, unit of account and store of value
28 properties of money: portable(easy to carry around), fungible(can be divided), durable, rare and not valuable(or people will debase money by moving small part of it)
29 definition of money: M0: only currency
M1:M0+checking deposit
M2: M1+close money substitutes
Quantity theory of money
30 MV=PY
31 ex: when fed prints money but does not use them, v=0 so there is no real effect in the economy
Savings and investment:
32 an economy can only save by building constructions that might be used in the future
33 in a closed economy: C+I+G=GDP=C+G+savings (total spending +that are not spent)
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