aggregate demand and supply definitions Flashcards
(16 cards)
gross investment
the total amount a country or company spends on new capital good
net investment
gross investment minus depreciation
net trade balance
the total value of exported goods and services minus the total value of imported products.
tariff
tax on imports
aggregate supply
total amount producers in economy are willing and able to supply at a given price level in given time period
short run aggregate supply
shows total planned output when prices in economy can change but prices and productivity of all factor inputs = constant
long run aggregate supply
output when prices can change
measure of a countrys potential output.
classical LRAS
measure of countrys potential output , shows productive potential of ecconomy - full capacity output
assume in long run wages = flexible and unemployment = eliminated as real wages adjust
Keynesian lRAS
in long run wages are sticky and may not fall far enough to eliminate unemployment.
accelerator theory
theory level of investment is related to past changes in income
net trade
exports - imports
net investment
gross investment minus depreciation
supply-side shocks
factors which cause short run aggregate supply curve to shift
investment
addition of capital stock to economy
budget deficit
gov spending higher than taxation in a fiscal year
budget surplus
gov spending less than taxation