CLEP Macroeconomics

Scarce. The desire of society (individual consumers, government, business) to obtain and use goods and services is unlimited and the objective of all economic activity is to satisfy these material wants. The problem lies in the fact that economic resources (land, capital, labor, enterprise) are limited or scarce and therefore society will not be able to produce and consume all the goods and services it wants. Economics, then, is the science of efficiency; concerned with allocating these scarce resources so as to achieve maximum fulfillment of our material wants.

In economics, absolute advantage refers to the ability of a party (an individual, firm, or country) to produce more of a good or service than competitors, using the same amount of resources.^[1].^{[2][3][4][5][6]} If a party has an absolute advantage when using the same input as another party, it can produce a greater output.^[7][8] Since absolute advantage is determined by a simple comparison of labor productivities, it is possible for a party to have no absolute advantage in anything

It can be contrasted with the concept of comparative advantage which refers to the ability to produce a particular good at a lower opportunity cost.

The AD-AS or Aggregate Demand-Aggregate Supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply. to determine and explain price level, real domestic output, disposable income, and employment.

All spending for final goods and services in an economy: C + Ig + G + Xn = AE

The aggregate expenditure model relates aggregate expenditures, which is the sum of planned level of consumption + investment + government purchases + net exports at a given price level, to the level of GDP. The key word here is planned. GDP is the same as aggregate expenditures(AE) except for one difference.
People, firms and governments don't always spend what they had planned. So AE differs from GDP in that it deals exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested as in GDP

Distribution of resources among firms and industries to obtain production quantities of the products most wanted by society (consumers); where marginal cost equals marginal benefit.

Measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits). Balance of payments is one of the major indicators of a country's status in international trade, with net capital outflow.^{[citation needed]} The balance, like other accounting statements, is prepared in a single currency, usually the domestic. Foreign assets and flows are valued at the exchange rate of the time of transaction.

Summary of a nation's current account and its financial account.

Financial instrument throuth which a borrower (corporate or government) is contracted to pay the principal at a specified interest rate at a specific date (maturity) in the future; promissory note.

Section of a nation's international balance-of-payments balance sheet that recordes foreign purchases of U.S. assets (money in) and U.S. purchases of foreign assets (money out).

Money from abroad that is used to buy investments, to be deposited in U.S. banks, to buy U.S. government bonds, or to be lent in the United States for any reason.

Change in demand: change in the quantity demanded of a good or service at all prices; a shift of the supply curve to the left (decrease) or right (increase). Change in supply: Change in quantity supplied of a good or service at all prices; a shift of the supply curve to the left (decrease) or right (increase).

Flow of resource inputs from households to businesses and of g/s from businesses to households. A flow in the opposite direction of money--business to households for inputs and from households to businesses for g/s--occurs simultaneously.

A country has a comparative advantage over another country in one good as opposed to another good if its relative efficiency in the production of the first good is higher than the other country’s. Determines specialization and exchange rate for trade between nations.