Macroeconomics Booklet 2 Flashcards
(18 cards)
Accelerator effect
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 expenditures in an economy.
C+I+G+(X-M)
consumer spending + investment + government spending + ( net exports )
Classical economics
18th - 19th century
Workings of market and adjustments in price to allocate recorces.
Consumer confidence
Households willingness to spend based on optimism or pessimism about the economy.
Consumption / consumer spending
Spending by households.
Disposable income
Income after taxes and transfer payments.
Intrest rate
% return on added for saving and charged on borrowing
Investment
Spending by firms on capital.
Long run
Time period in which all factors of production (CELL) are variable in quantity.
Macroeconomic equilibrium
Aggregate demand = Aggregate supply with no reason 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 effect
An increase in a component of AD leads to a more than proportionate increase in real national output.
Net exports
Exports - Imports
(Exports - Imports)
Public sector
The part of the economy directly controlled by the government.
Recession
Fall in real G.D.P for two successive quarters.
Reverse (negative/downwards) multiplier
When a decrease in a component of AD leads to a more than proportionate decrease in real national output.
Short run
Time period in which at least one factor of production (CELL) is fixed in quantity.
