2.2 Flashcards
aggregate demand definition
total level of new demand/ expenditure in an economy
aggregate demand shift formula
Consumption +
Investment (business) +
Government spending +
eXports - iMports
aggregate demand movement
change in price
average propensity to consume definition and formula
C / Y
proportion of income spent on consumption
wealth effect definition
as value of their assets rise, consumer confidence grows even if income doesnt change
marginal propensity to consume definition and formula
△C / △Y
proportion of a pay rise spent on consumption
factors influencing consumption (8)
Unemployment
Natural disasters
Consumer confidence
Taxes
Income
Trends
Inflation
Interest rates
investment definition
total value of all newly produced capital goods, both physical (machines) and intangible (software)
gross and net investment
gross is total additional capital stock, net is gross - depreciation
depreciation definition
amount by which an assets value falls in a given period
average propensity to save formula
S / Y
marginal propensity to save formula
△S / △Y
savings and savings ratio
savings = income - consumption
ratio is proportion of disposable income that is saved
factors influencing investment (7)
Gov and regulations
Rate of economic growth
Business expectations and confidence
Demands for exports
Access to credit
Interest rates
Keynes, animal spirits
factors affecting government expenditure (7)
Debt levels
Unemployment
Politics
Economic growth
Business cycle
Inflation
Tax revenue
