Aggregate Supply
The total amount supplied within an economy.
Aggregate Demand
The total level of demand within an economy.
AD = C + G + I + (X- M)
Consumption
Consumer spending on goods and services.
Marginal Propensity to Consume (MPC)
The proportion of a change in income that is spent.
MPC = change in consumption/change in income
Autonomous consumption
The consumption that is present even when no income is earned.
Investment
Investment is the addition to the capital stock of the economy by firms – factories, machines, offices and stocks of materials, used to produce other goods and services.
Full capacity
Normal rates of use of the factors of production.
Price level
Average price of all goods and services within an economy.