Aggregate Demand - Definitions Flashcards
Aggregate Demand
Overall demand for goods and services in an economy
Consumption
Total spending by households on goods and services
Investment
Expenditure by firms on goods that have a delayed consumption
Government Spending
Total expenditure by the government
Net Exports (net trade)
Exports minus imports (can be positive or negative)
Disposable Income
Personal income left over for after taxes (and benefits) for consumption
Marginal Propensity to
Consume
The proportion of additional income that is spent on consumption (as opposed to saving)
Household Savings
Ratio
The proportion of disposable income that is saved (across the whole economy)
Net Investment
Investment minus depreciation
Trade/Business Cycle
The characteristic path of economic growth in an economy, with periods of slow or negative
growth followed by periods of strong growth, and so on
Fiscal Policy
Use of spending and taxation by the government to influence the economy
Exchange Rate
The price at which one currency can be exchanged for another
Protectionism
Restricting free trade between economies, through tariffs, subsidies, quotas or other means
