10 - How the Macroeconomy Works Definitions Flashcards
Circular Flow
All major exchanges in the economy represented as flows.
Injections
Variables which add to the circular flow (I, G, X).
Withdrawls
Variables which leak out of the circular flow. (S, T, M).
Economic Agent
An entity which engages in economic activity.
Households
Either one person living alone, or a group of people living together, and sharing things.
Firms
Businesses or organisations who produce or sell goods and services with the aim of making profit.
Money Flows
The flow of money between economic agents. e.g. Interest Payments.
Real Flows
The flow of goods and services between economic agents.
Aggregate Demand
The total demand for goods and services within a particular market.
Aggregate Supply
The total supply of goods and services available to a particular market from producers.
Consumption
The use of goods and services by a household.
Investment
The addition of capital or stock to the economy, used for generating future income.
Exports
Products made in this country, and sold to other countries.
Imports
Goods or services produced in another country, which this country buys.
Trade Surplus
When a country exports more than it imports, meaning trade is profitable.
Trade Deficit
When a country imports more than it exports, meaning trade isn’t profitable.
Budget Surplus
More revenue is brought in through taxation than is spent.
Budget Deficit
More is spent than brought in through taxation.
Savings Ratio
The ratio of personal savings to disposable income.
Multiplier Effect
The effect of demand on GNI and GDP.
Marginal Propensity to Consume
A measure of the proportion of an increase in income that a household is likely to spend on consumption.
Marginal Propensity to Save
Change in household saving, as a result of a change of a change in disposable income.
Accelerator Effect
An increase in GDP results in a rise in capital investment.
