Chapter 4:aggregate demand and aggregate supply and their interaction
- Created by: Adaora Soludo
- Created on: 06-04-11 20:00
Chapter 4:aggregate demand and aggregate supply and their interaction
Aggregate demand
The total demand for a country’s goods and services at a given price level and in a given time
Price level
The average of each of the prices of all the products produced in an economy
Consumer expenditure
Spending by households on consumer products
Investment
Spending on capital goods
Government spending
Spending by the central government and local government on goods and services
Exports
Products sold abroad
Imports
Products bought from abroad
Net exports
The value of exports minus the value of imports
Transfer payments
Money transferred from one person or group to another not in return for any good or service
Job seeker’s allowance
A benefit paid by the government to those unemployed and trying to find a job
Trade surplus
The value of exports exceeding the value of imports
Trade deficit
The value of imports exceeding the value of exports
Consumer confidence
How optimistic consumers are about future economic prospects
Rate of interest
The charge for borrowing money and the amount paid for lending money
Average propensity to consume (APC)
The proportion of disposable income spent. It is consumer expenditure / disposable income
Net savers
People who save more than they borrow
Wealth
A stock of assets, e.g. property, shares & money held in savings account
Distribution of income
How income is shared out between households in a country
Inflation
A sustained rise in the price level
Saving
Real disposable income – spending
Average propensity to save (APS)
The proportion of disposable income saved. It is saving / disposable income
Target savers
People who save with a target figure in mind
Dissave
Spending more than disposable income
Savings ratio
Savings as a proportion of disposable income
Capacity utilization
The extent to which firms are using their capital goods
Corporation tax
A tax on firms’ profits
Retained profits
Profit kept by firms to finance investment
Unit cost
Average cost per unit of output
Real GDP
The country’s output measured in constant prices and so adjusted for inflation
Gross domestic product (GDP)
The total output of goods and services produced in a country
Exchange rate
The price of one currency in terms of another currency
Tariff
A tax on imports
Government bond
A financial asset issued…
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