Definitions

Question 1

Circular flow of income

Answer 1

Shows how firms and households interlink in an economy

Question 2

Marginal propensity to consume MPC

Answer 2

The proportion of additional income that households devote to consumer expenditure

Question 3

Marginal propensity to save MPS

Answer 3

The proportion of additional income that households devote to saving

Question 4

Average propensity to consume APC

Answer 4

The proportion of income that households devote to consumer expenditure

Question 5

Average propensity to save APS

Answer 5

The proportion of income that households devote to saving

Question 6

Marginal propensity to withdraw MPW

Answer 6

MPSave + MPTax + MPImport

Question 7

Multiplier

Answer 7

The process by which any change in a component of AD results in a greater proportional final change in RGDP

Question 8

Aggregate demand AD

Answer 8

Total demand for goods and services produced in an economy at a given price level at a given time period

Question 9

Investment

Answer 9

Spending on capital goods

Any man made aid to production

Question 10

Gross investment

Answer 10

Total capital spending

Question 11

Net investment

Answer 11

Total capital spending - capital consumption

Question 12

Trade

Answer 12

Buying and selling goods and services from other countries

Question 13

Imports

Answer 13

Purchase of goods or services from abroad that leads to an outflow of currency

Question 14

Exports

Answer 14

Sale of goods or services to buyers from abroad that leads to an inflow of currency

Question 15

Aggregate supply AS

Answer 15

Total amount that producers in an economy are willing and able to produce at a given price level in a given time period

Question 16

Short run aggregate supply SRAS

Answer 16

When the prices of the FoP are assumed to not be changing

Question 17

Long run aggregate supply LRAS

Answer 17

When the prices of the FoP are variable

Question 18

Macroeconomic equilibrium

Answer 18

Any position in an economy where AD is equal to AS

Question 19

Circular flow of income

Answer 19

Shows how firms and households interlink in an economy

Question 20

Marginal propensity to consume MPC

Answer 20

The proportion of additional Y that households devote to consumer expenditure

Question 21

Marginal propensity to save MPS

Answer 21

The proportion of additional Y that households devote to saving

Question 22

Average propensity to consume APC

Answer 22

The proportion of Y that households devote to consumer expenditure

Question 23

Average propensity to save APS

Answer 23

The proportion of Y that households devote to saving

Question 24

Marginal propensity to withdraw MPW

Answer 24

MPSave + MPImport + MPTax

Question 25

Multiplier

Answer 25

The process by which any change in a component of AD results in a greater final change in RGDP

Question 26

Aggregate demand AD

Answer 26

Total demand for good and services produced in an economy at a given price level at a given time period

Question 27

Aggregate supply AS

Answer 27

Total amount that producers in an economy are willing and able to produce at a given price level at a given time period

Question 28

Short run aggregate supply SRAS

Answer 28

When the prices of the FoP are assumed not to be changing

Question 29

Long run aggregate supply LRAS

Answer 29

When the prices of the FoP are variable

Question 30

Macroeconomic equilibrium

Answer 30

Condition in the economy in which the quantity of aggregate demand equals the quantity of aggregate supply