4.3 Aggregate Demand and Aggregate Supply analysis Flashcards
Define the term “Aggregate Demand (AD)”
The total demand for an economy’s goods and services at a given price level in a given time period.
Define the term “Consumer Expenditure”
Spending by households on goods and services.
How can you calculate the AD?
AD = C + I + G + (X-M)
Define the term “Dissaving”
Consumer expenditure exceeds income, with people or countries drawing on past savings, or borrowing.
Define the term “Saving”
Income - consumption
Define the term “Investment”
Spending on capital goods.
Define the term “Government spending”
The total of local and national government expenditure on goods and services.
Define the term “Net exports”
Exports - Imports
Define the term “Exchange rates”
The price of one currency in terms of another.
Define the term “Aggregate Supply”
The total output (real GDP) that producers in an economy are able and willing to supply at a given price level in a given time period.
Define the term “Short run aggregate supply (SRAS)”
The total output of an economy that will be supplied when there has not been enough time for the prices of factors of production to change.
Define the term “Long run aggregate supply (LRAS)”
The total output of a country supplied in the period when prices of factors of production have fully adjusted.
Define the term “Average cost”
The cost per unit of output.
Define the term “Supply-side shocks”
Large and unexpected changes in the short-run aggregate supply.
Define the term “Keynesians”
People who agree with the view of economist John Maynard Keynes that government intervention is needed to achieve full employment.
