Macroeconomics CLEP prep

Long Run Aggregate Supply, LRAS is the natural level of GDP. It is shown vertical on a graph. When LRAS shifts, SRAS (Short Run Aggregate Supply) will follow .

Real Estate, Equipment, and Cash (physical assets)

Patents, Goodwill, and Trademarks (lack physical substance)

Economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other.

The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time.

When quantity supplied is more than quantity demanded. The formula for excess supply is: Supply - Demand = Excess Supply

Maximum price that a customer is willing to pay for a good

The difference between a buyer's reservation price (the price they want to pay) and the actual price paid for a good or service

The difference between the price received by the seller and the seller's reservation price

The difference between the buyer's reservation price and the seller's reservation price. Consumer surplus + Producer surplus

A market with unrestricted trading of goods, where the prices of goods are determined by supply and demand.

In a traditional economic system, the availability of resources is based on inheritance. Goods are only produced for consumption and surpluses do not occur. This type of economy is normally found in South American, Asian, and African countries.

An economic system in which all factors of production are owned and controlled by the government. Often referred to as a centrally planned economic system. Example: Former Soviet Union.

Combines pure market and command.
Example: Japan

A law stating that as a person consumes additional units of a good, eventually the utility gained from each additional unit of the good decreases.

A law stating that as the price of a product increases the demand of that product decreases, while if the price of a product decreases the demand for that product increases.

The law that states that as the price of any good or service increases, the quantity of that good or service will increase and vice versa.

The ease with which an asset can be converted to currency.

The part of economics study that looks at the operation of a nation's economy as a whole

(n) something of value; a resource; an advantage