Economics Key Terms (Macro)

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Aggregate Demand- total demand in the economy

Aggregate Supply- total value of goods and services supplied in the economy

Economic Growth- the capacity for the economy to create more goods and services over time

GDP- total value of goods and services produced in the economy

Negative Output Gap- when an economy is producing less than its trend output

Positive Output Gap- when actual GDP exceeds trend GDP increasing inflationary pressure

Trade-off- where one macro-economic objective has to be given up in favour of another objective

Employment- where labour is actively engaged in, in echange for payments

Unemployment- those without a job but who are seeking work at current wage rates

Nominal GDP- not adjusted for inflation

Real GDP- figures adjusted for inflation

GDP per capita- GDP divided by population (measure of living standards)

Index Numbers- a weighted average of a group of items compared to a given base value of 100

Recession- when an economy is growing at less than its long-term rate of growth for more than two quarters

Balance of payments- exports minus imports (deficit = I > E) 

Injections- money that originates outside the circular flow and so will increase national income/output/expenditure

Withdrawals- any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure

Investment- spending by firms on building machinery and improving…


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