- Aggregate demand: total demand in the economy made up of consumption, investment, government spending, exports and imports. C+I+G+(X-M)
- Aggregate supply: total value of goods and services supplied in the economy
- Economic growth: the capacity of the economy to produce more goods and services over time
- GDP: the total value of goods and services produced in an economy
- Negative output gap: where economy is producing less than its trend output
- Positive output gap: when actual GDP exceeds trend GDP increasing inflationary pressure
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- Trade-off: when macroeconomic objectives conflict
- Imports: goods or services purchased from abroad
- Exports: goods or services sold abroad
- Employment: where labour is actively engaged in a productive activity usually in exchange for payments
- Unemployment: those without a job who are seeking work at current wage rates
- Exporting: the sale of goods or services to a foreign country – generates income for the home country.
- Importing: the purchase of goods and services from abroad – lead to expenditure for the home country
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- Economic indicators: economic stats that provide information about the expansions and contractions of business cycle.
- Nominal GDP: GDP not adjusted for inflation
- Real GDP: figures for GDP adjusted for inflation
- GDP per capita: GDP divided by population – measure standard of living
- Index numbers: a weighting average compared to a given base of 100
- Weighting: where a commodity is given a weighting proportional to its importance in the general pattern of consumer spending.
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- Economic models: these are used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables
- Recession: when an economy is growing at less than its long-term trend rate of growth (for 2 consecutive quarters)
- Balance of payments: exports minus imports
- Flow: measured over a specific period of time
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- Stock: a quantity measured at a particular time
- Injections: money that originates outside the circular flow and so will increase national income/output/expenditure.
- Withdraws: any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure.
- Investment (I): spending by firms on buildings, machinery and improving the skills of labour force.
- Saving (S): a withdrawal from the circular flow
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