2.2 aggregate demand Flashcards
(21 cards)
aggregate demand
total demand for goods and services in an economy at a given price level over a period of time
AD=C+I+G+(X-M)
consumption, investment, government spending, exports, imports
consumption
spending by households on goods and services
disposable income
income after taxes and benefits
marginal propensity to consume
the proportion of additional income spent on consumption that is left over when ll basic needs are met
consumer confidence
the level of optimism about future income and employment
investment
spending by firms on capital goods
gross investment
total spending on capital goods
net investment
gross investment minus depreciation
marginal efficiency of capital
the expected rate of return on investment
animal spirits
Today in finance, the term animal spirits arise in market psychology and behavioral economics. Animal spirits represent the emotions of confidence, hope, fear, and pessimism that can affect financial decision-making, which in turn can fuel or hamper economic growth.
government spending
spending by the public sector on goods and services
fiscal policy
use of government spending and taxation to influence the economy
net exports
exports - imports
trade balance
surplus or deficit in the current account
shifts in AD
caused by a change in any component of ad
movement along the AD curve
is caused by changes in the price level
multiplier effect
the process by which an initial change in spending leads to a larger change in national income
marginal propensity to save
the proportion of additional income saved
marginal propensity to import
the proportion of additional income spent on imports
marginal rate of taxation
the proportion of additional income paid in tax
