T2.2 AD (c+i+g+(x-m)) Flashcards
(35 cards)
What is aggregate demand?
Total amount of goods and services demanded in the economy at a given time and price level. It is the sum of consumption expenditure, investment expenditure, government expenditure and net exports.
What are animal spirits?
The state of confidence or pessimism held by consumers and businesses.
What is consumer confidence?
Expectations about the future including interest rates, incomes and jobs.
What are consumer durables?
Products such as washing machines or computer screens that are not used up immediately when consumed and which provide a flow of services over time.
What is consumer spending?
Household spending on G&S. In the UK, household consumption is the largest element of AD: 67% in 2019.
What is disposable income?
Gross income less income tax and national insurance contributions plus welfare benefits.
What is household income?
The financial resources available to households to spend or save.
What is the formula for gross income?
Gross income = original income + cash benefits.
What is the formula for disposable income?
Disposable income = gross income minus direct taxes.
What is post-tax income?
Post-tax income = disposable income minus indirect taxes.
What is wealth?
The monetary value of assets - including property, shares, savings, pension fund assets.
What is income?
Income is a flow of money to factors of production such as wages and salaries paid to people in work, interest from savings and rental income from owning land/assets.
What is an interest rate?
An interest rate is the cost or price of borrowing, or the gain from lending, normally expressed as an annual percentage amount.
What is negative equity?
When the value of an asset falls below the debt left to pay on that asset.
What is a pension fund?
Fund that pools employees’ pension benefits and holds them so that they can be paid at retirement. The money is invested in stocks, bonds and other assets to boost returns and ensure that there are sufficient funds to be paid out.
What is the personal allowance?
The amount of income you can earn before you start paying income tax. It is £12,500 in 2019.
What is precautionary saving?
Saving because of fears of a loss of real income or rising unemployment.
What is the savings ratio?
The percentage of household disposable income that is saved rather than spent.
What is unsecured credit?
Credit not secured by another asset - i.e. money borrowed on credit cards.
What is the wealth effect?
The supposed link between changes in wealth and household spending.
What is access to credit?
The willingness and ability of financial institutions to lend funds to producers and consumers.
What is business confidence?
Expectations about the future of the economy - vital in influencing business decisions about how much to spend on new capital goods and employment intentions.
What is gross investment?
Total investment calculated by adding new investment to replacement investment.
What is net investment?
Total investment minus replacement investment.
