The rate at which the general level of prices for goods and services is rising.
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Deflation
A decrease in general price levels throughout an economy. Falling prices.
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Disinflation
A decrease in the rate of inflation. The inflation rate is declining over time, but it remains positive. Slowly rising prices.
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Stagflation
Describes a period of inflation when the economy is also in recession.
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Index Number
A number that expresses the relative change in price, quantity, or value compared to a base period.
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Consumer Price Index
A basket of goods made by the government which is weighted and compared with last year's prices, the percentage change is the inflation rate.
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CPI Formula
(Sum of Price x Weight) / Sum of Weights = CPI
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Retail Price Index
CPI and housing costs.
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Balance of Payments Account
Record of payments between one country and the rest of the world.
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Current Account Formula
Current Account = Inflows - Outflows
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Credit
Money/goods coming into the country.
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Debit
Money/goods going out of the country.
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Aggregate Demand
Total demand for final goods and services in the economy at a given time and price level.
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AD Equation
AD = Consumption + Investment + Government Spending + (Exports - Imports)
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Average Propensity to Consume
Measures the average amount spent on consumption out of total disposable income.
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APC Formula
APC = Comsumption / Income
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Average Propensity to Save
Measures the amount of disposable income that is saved.
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APS Formula
APS = Saving / Income
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Marginal Propensity to Consume
Measurement of how much consumption will rise in response to a change in income.
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MPC Formula
MPC = Change in Consumption / Change in Income
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Marginal Propensity to Save
Measurement of how much any additional income is saved.
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MPS Formula
MPS = Change in Saving / Change in Income
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Fiscal Policy
Involves use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment.
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Aggregate Supply
Defined as the total amount of goods and services (real output) produced and supplied by an economy's firms over a period of time.
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Other cards in this set
Card 2
Front
A decrease in general price levels throughout an economy. Falling prices.
Back
Deflation
Card 3
Front
A decrease in the rate of inflation. The inflation rate is declining over time, but it remains positive. Slowly rising prices.
Back
Card 4
Front
Describes a period of inflation when the economy is also in recession.
Back
Card 5
Front
A number that expresses the relative change in price, quantity, or value compared to a base period.
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