Deck 1: Aggregate Demand & Aggregate Supply Flashcards
(11 cards)
Q: 🔄 What is the circular flow of income?
A: It’s a model showing how money moves through an economy between producers and consumers, illustrating the flow of income, output, and expenditure.
Q: 💸 What are the components of Aggregate Demand (AD)?
A: Consumption (C), Investment (I), Government Spending (G), and Net Exports (X - M).
Q: 📈 What factors cause shifts in the AD curve?
A: Changes in consumer confidence, interest rates, government policies, exchange rates, and global economic conditions.
Q: 🏭 What is Aggregate Supply (AS)?
A: The total output of goods and services that producers in an economy are willing and able to supply at a given overall price level.
Q: ⚖️ What determines macroeconomic equilibrium?
A: The point where Aggregate Demand equals Aggregate Supply, determining the overall price level and output in the economy.
Q: 🔁 What is the multiplier effect?
A: The process by which an initial change in spending leads to a larger change in national income.
Q: 🚀 What is the accelerator effect?
A: The theory that investment levels are related to the rate of change of economic output or demand.
Q: 📉 What are output gaps?
A: The difference between actual economic output and potential output, indicating underperformance or overheating in the economy.
Q: 📈 What is a positive output gap?
A: When actual output exceeds potential output, often leading to inflationary pressure.
Q: 🔄 What is the relationship between savings and investment?
A: Savings provide funds for investment, influencing economic growth.
Q: 🧮 How is national income measured?
A: Through output, income, and expenditure methods.
