Macroeconomics Chapter 4 Aggregate Demand and Aggregate Supply and their Interaction DEFINITIONS

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Aggregate Supply:
The total output of goods and services that producers in an economy are willing and able to supply at different price levels in a given time period.
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Aggregate Demand:
The total demand for a country's goods and services at a given price level and in a given time period.
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Price Level:
The average of each of the prices of all the products produced in an economy
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Consumer Expenditure:
Spending by households on consumer products
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Investment:
Spending on capital goods.
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Government Spending:
spending by the central government and local government on goods and services.
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Exports:
Products sold abroad.
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Imports:
Products bought from abroad.
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Net Exports:
The value of exports minus the value of imports.
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Transfer Payments:
Money transferred from one person or group to another not in return for any good or service.
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Job Seeker's Allowance:
A benefit paid by the government to those unemployed and trying to find a job.
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Trade Surplus:
The value of exports exceeding the value of imports.
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Trade Deficit:
The value of imports exceeding the value of exports.
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Consumer Confidence:
How optimistic consumers are about future economic prospects.
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Rate of Interest:
The charge for borrowing money and the amount paid for lending money.
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Average Prosperity to Consume:
APC. The proportion of disposable income spent. It is consumer expenditure divided by disposable income.
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Net Savers:
People who save more than they borrow.
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Wealth:
A stock of assets, e.g. property, shares and money held in a savings account.
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Distribution of Income:
How income is shared out between households in a country.
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Inflation:
A sustained rise in the price level.
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Saving:
Real disposable income minus spending.
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Average Prosperity to Save:
APS. The proportion of disposable income saved. It is saving divided by disposable income.
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Target Savers:
People who save with a target figure in mind.
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Dissave:
Spending more than disposable income.
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Savings Ratio:
Savings as a proportion of disposable income.
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Capacity Utilisation:
The extent to which firms are using their capital goods.
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Corporation Tax:
A tax on firm's profits.
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Retained Profits:
Profit kept by firms to finance investment.
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Unit Cost:
Average cost per unit of output.
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Real GDP:
The country's output measured in constant prices and so adjusted for inflation.
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Gross Domestic Product:
GDP. The total output of goods and services produced in a country.
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Exchange Rate:
The price of one currency in terms of another currency.
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Tariff:
A tax on imports.
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Government Bond:
A financial asset issued by the central or local government as a means of borrowing money.
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Aggregate Supply:
The total amount that producers in an economy are willing and able to supply at a given price level in a given time period.
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Productivity:
Output, or production, of a good or service per worker per unit of a factor of production in a given time period.
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Privatisation:
Transfer of assets from the public to the private sector.
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Macroeconomic Equilibrium:
A situation where aggregate demand equals aggregate supply and real GDP is not changing.
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Circular Flow of Income:
The movement of spending and income throughout the economy.
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Factor Services:
The services provided by the factors of production.
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Leakages:
Withdrawals of possible spending from the circular flow of income.
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Injections:
Additions of extra spending into the circular flow of income.
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Multiplier Effect:
The process by which any change in a component of aggregate demand results in a greater final change in real GDP.
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Overheating:
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation.
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Output Gap:
The difference between an economy's actual and potential GDP.
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Trend Growth:
The expected increase in potential output over time.
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Card 2

Front

The total demand for a country's goods and services at a given price level and in a given time period.

Back

Aggregate Demand:

Card 3

Front

The average of each of the prices of all the products produced in an economy

Back

Preview of the back of card 3

Card 4

Front

Spending by households on consumer products

Back

Preview of the back of card 4

Card 5

Front

Spending on capital goods.

Back

Preview of the back of card 5
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