B2 definitions

Question 1

Aggregate demand

Answer 1

is the total of all planned expenditure in the economy
consumption - C 
Investment - I 
public expenditure - G 
Net exports - X-M

Question 2

consumption

Answer 2

is household expenditure on goods and services such as food and drink, motor cars, holidays, private education and entertainment

Question 3

saving

Answer 3

is that part of household disposable income that is not spent on goods and services

Question 4

investment

Answer 4

is business expenditure on capital goods such as machinery vehicles and factories

Question 5

government expenditure

Answer 5

is expenditure by the public sector (government) on goods and services like defence, education and health care

Question 6

net exports

Answer 6

is exports of goods and services minus imports of goods and services i.e. balance of trade

Question 7

the circular flow of income

Answer 7

is a model of the economy in which the flows of income and expenditure between households and firms as shown

Question 8

injections

Answer 8

addition to circular flow of income

investment, government expenditure and exports

Question 9

leakages

Answer 9

withdrawal from circular flow of income

savings, taxation and imports

Question 10

the multiplier effect

Answer 10

occurs where an increase or any other autonomous expenditure will lead to a greater increase in real output
doubles