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1. AD & AS

Macro

TermDefinition
Circular Flow of Income a model of the economy which shows the flows of goods and services, the factors of production and money around the economy
Injections spending power entering the circular of income resulting from investment, government spending and exports
Leakages spending power leaving the circular flow of income resulting from savings, taxation and imports
Macroeconomic Equilibrium where the rate of withdrawals equals the rate of injections
Monetary Flows the flow of money, for example from taxes or from consumption
Physical Flows the flow of a good or service
Aggregate Demand the total level of demand in an economy at any given price level at a moment in time
Consumption consumer spending on goods and services
Exports goods and services sold to foreign countries that provide an inflow of money
Imports goods and services bought from foreign countries that lead to an outflow of money
Investment spending by businesses on capital goods, which leads to the creation of real goods
Government Expenditure spending by the government for the provision of goods and services
Net Exports exports minus imports
Aggregate Supply the total amount of output in the economy at any given price level at a moment in time
Long-Run when all factors of production are variable
Long-Run Aggregate Supply the total amount of output in the economy at any given price level at a moment in time
Short-Run when at least one factor of production is fixed
Short-Run Aggregate Supply aggregate supply when at least one factor of production is fixed
Accelerator Theory a change in consumption will cause a larger percentage change in investment; high consumption leads to high investment
Average Propensity to Consume the percentage of income spent on goods and services (total consumption/total income)
Average Propensity to Save the percentage of income that is saved (total savings/total income
MPC the proportion of an increase in income spent on consumption (change in consumption/change in income)
MPS the proportion of an increase in income that is saved (change in money saved/change in income)
MPW the proportion of an increase in income that is withdrawn from the circular flow
Multiplier an increase in an injection will lead to an even greater increase of national income (1/1-MPC or 1/MPW)
Negative Output Gap when GDP is lower than predicted; the economy is producing below full output
Output Gap the difference between the long term trend rate of growth and actual growth
Positive Output Gap when GDP is higher than predicted; the economy is producing above full output
Created by: 19thomps
 

 



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