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.
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