AP Macroeconomics

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AP Macroeconomics
Introduction
• Economics: Concerned with the efficient use
and management of limited productive
resources to achieve maximum satisfaction of
human material wants and needs.
• Study of behaviour in producing, distributing,
and consuming material goods and services in
a world of scarce resources.
• Scarcity: Wants exceed resources.
• We want more than we are capable of getting.
• Microeconomics: Deals with specific
economic units and a detailed consideration
of these individual units.
• Macroeconomics: Deals either with the
economy as a whole or the basic subdivision
or aggregates such as government, household,
or business sectors, which make up the
economy.
• Ceteris Paribus: Other things
being equal. In economics when
you are working on a problem we
must assume that only those
variables will change. All others
remain the same.
The Economic Way of Thinking
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Everything has a cost
People choose for good reasons
Incentives matter
People create economic systems to influence
choices and incentives
• People gain from voluntary trade
• Economic thinking is marginal thinking
The Economic Way of Thinking
• The value of a good or service is affected by
people’s choices
• Economic actions create secondary effects
• The test of a theory is its ability to predict
correctly.

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