Aggregate Demand- KEY TERMS


Avergage Propensity to consume (APC) - the proportion of total income spent, C/Y.

Average propensity to save- the proportion of a total income that is saved, S/Y.

Consumption- total expenditure by households on g&s in a given time period.

Consumption function- the relationship between households' consumption and the factors that determine it.

Disposable income- household income over a period of time, including state benefits after tax is deducted.

Durable goods- goods that are consumed over a long period of time.

Marginal propensity to consume (MPC)- the proportion of a change in income which is spent, ▲C/ ▲Y.

Marginal propensity to save (MPS)- the proportion of a change in income that is saved, ▲S/▲Y.

Non-durable goods- goods that are consumed almost immediately.

Savings function- the relationship between the saving of households and factors that determine it.

Saving (personal)- the portion of household's disp Y which is not spent over a period of time.

Wealth effect- the change in consumption following a change in wealth.

Accelerator coefficient- the capital-output ratio.

Accelerator theory- the theory that the level of investment is related to past changes in income.

Animal spirits- business confidence: moods of managers and owners about the future of their industry and the wider economy.


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