AD + AS Flashcards
Aggregate demand
the total spending on an economy’s goods and services at a given price level in a given time period
Aggregate supply
the total output (real GDP) that producers in an economy are willing and able to supply at a given price level in a given time period
Long-run aggregate supply
the total output of a country supplied in the period when prices of FOPs have fully adjusted
short-run aggregate supply
the total output of an economy that will be supplied when there has not been enough time for the prices of FOPs to change
hyperinflation
a very rapid increase in the price level, may result in people losing confidence in currency
consumer price index
an index that shows the average change in prices of a representative basket of products purchased by households
disinflation
a fall in the inflation rate (“An increase in price levels at a decreasing rate”)
inflation
an increase in the average price level and a fall in the value of money
real income
money income - inflation
inflation rate
the percentage change in the average price level
Consumption
this is known as consumer expenditure, it consists of spending by households on goods and services.
Investment
this is spending by private sector firms on capital goods
Government spending
this covers government spending on the public sector, infrastructure and welfare
Net exports
this is the difference between the value of exports of goods and services and the value of imports of goods and services
Why is AD downward sloping?
wealth effect
international effect
interest rate effect
