How Macro Economy Works Flashcards
(19 cards)
Accelerator
A change in the level of investments, brought about by a growth of aggregate demand
Actual output
Level of actual output produced in the economy in a year
Aggregate demand
Total planned spending on real output
Aggregate supply
Circular flow of income
The circulation of national income, output of expenditure
Gross domestic product GDP
The sum of all goods and services produced in an economy over a period of a time.
Injection
Spending power entering the circular flow of income resulting from investment, gov spending and exports
Keynesian economists
Believes the government should generally manage the economy
Long run aggregate supply (LRAS)
Aggregate supply when the economy produces its productive potential.
Monetarists
Economists who believe increase in the money supply is a significant factor of inflation
Multiplier
The relationship between a change in AD and the change in national income
National income
The flow of new output produced by the economy
Nominal GDP
GDP measured, at current market prices without taking into account the effects of inflation.
Real GDP
GDP measured, taking into account effects of inflation
Real wage
The purchasing power of the nominal wage, after taking into account the effects of inflation
Real wage unemployment
Unemployment caused by real wages being stuck above the equilibrium wage rate
SRAS
AS when the eleven of capacity is fixed
Short run econ growth
An increase in the real output by taking up slack in the economy
Trend rate of growth
The level of economic growth that is sustainable, without putting upward pressure on inflation
