AP Macroeconomics · Unit 1
Basic Economic Concepts: every key term you need
17 flashcard terms for AP Macroeconomics Unit 1, written to match the course framework. Study them here, then drill them as interactive flashcards — free, no account needed.
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Macroeconomics Definition Study of entire economy: aggregate output, employment, price levels, international trade. Focuses on big picture, not individual markets.
Microeconomics vs Macroeconomics Micro: individual consumers, firms, markets. Macro: national/global economy, GDP, unemployment, inflation, growth.
Production Possibilities Curve (PPC) Shows maximum production combos of two goods with given resources. Curved = increasing opportunity cost. Shift = growth or resource change.
Opportunity Cost What you give up to get something else. For economy: producing more of good A means producing less of good B.
Efficiency vs Inefficiency Point ON PPC = efficient (max output). Point inside PPC = inefficient (wasted resources). Can't produce beyond PPC.
Comparative Advantage Country has comparative advantage if lower opportunity cost to produce good. Differs from absolute advantage (higher productivity).
Specialization & Trade Countries specialize in products where they have comparative advantage, trade for others. Both benefit relative to autarky.
Economic Growth Outward shift of PPC; increases maximum production capability. Driven by: capital accumulation, technological progress, labor growth, resources.
GDP (Gross Domestic Product) Market value of all final goods/services produced within country in given period. Measures economic output/growth.
GDP vs GNP GDP: produced within country (geography-based). GNP: produced by country's citizens (citizenship-based). GDP used in US.
Nominal vs Real GDP Nominal: current prices. Real: adjusted for inflation (constant dollars). Real GDP shows true growth, accounting for price changes.
Business Cycles Expansion (growth), peak (maximum), recession (decline ≥2 quarters), trough (minimum). Cycle repeats; differs in length/severity.
Unemployment Rate Percentage of labor force unemployed. Labor force = employed + unemployed (exclude: children, retirees, students, institutionalized).
Types of Unemployment Frictional: job searching. Structural: skills mismatch. Cyclical: due to recession. Natural rate: frictional + structural.
Inflation Definition Increase in average price level of goods/services. Measured by CPI (Consumer Price Index). 2-3% annual inflation considered normal.
Deflation vs Stagflation Deflation: declining prices (rare, problematic). Stagflation: inflation + stagnation (high inflation + unemployment).
Unit 1 Summary Macroeconomics studies national output (GDP), employment, prices, growth. Opportunity cost drives specialization/trade. Business cycles characterize economic fluctuations.
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