Macro Booklet 2 Flashcards
(18 cards)
Accelerator Effect
When an increase in a component of AD leads to an increase in investment, triggering a further increase in AD
Aggregate Demand
The sum of all planned expenditure in an economy (consumption, investment, gov spending and net exports)
Classical Economics
The dominant school of thought in economics from the 18th to the late 19th centuries, underpinned by a belief in the workings of markets and adjustments in prices to allocate resources
Consumer Confidence
Households’ willingness to spend, reflecting their overall optimism or pessimism about the state of the economy
Consumption
Spending by households, also called consumer spending
Disposable Income
Income after taxes and transfer payments
Interest Rate
The percentage return added as a reward on savings and charges on borrowing
Investment
Spending by firms on capital
Long Run
The time period in which all factors of production are variable in quantity
Macroeconomic Equilibrium
The point at which AD equals AS with no tendency for the economy to change
Marginal Propensity to Consume
The proportion of an increase in income that is spent
Marginal Propensity to Save
The proportion of an increase in income that is saved
Multiplier Effects
When an increase in a component of AD leads to a more than proportionate increase in RNO
Net Exports
The value of a country’s exports minus the value of its imports
Public Sector
The part of the economy that is directly controlled by the government
Recession
A fall in real GDP for two successive quarters
Reverse Multiplier
When a decrease in component of AD leads to a more than proportionate decrease in RNO
Short Run
The time period in which at least one factor of production is fixed in quantity
