AS macro Key Words Flashcards
What’s aggregate demand
The total demand for a country’s goods and services at a given price level and in a given time period
What’s the AD formula
AD = C + I + G + (X - M)
What’s X - M
Exports - imports, its the net trade and so net exports
What’s consumption/ consumer expenditure
Spending by households on consumer products
What’s the largest component of AD
Consumption
What’s investment
Spending on capital goods
What’s government expenditure
Spending by the central government and local government on goods and services
This is health, education, and the police service
What does government expenditure not include
Transfer payments (housing benefit, job seekers allowance and state pensions)/ an increase in job seekers allowance would be reflected in consumption as the increase in benefits will create an increase in disposable income that would be spent on goods or services
What are transfer payments
Money transferred from one person or group to another not in return for any good or service
What’s jobs seekers allowance
A benefit paid by the government to those unemployed and trying to find a job
What are exports
Products sold abroad
What are imports
Products bought from abroad
What’s a trade surplus
The value of exports exceeding the value of imports
What’s a trade deficit
The value of imports exceeding the value of exports
UK has a trade Defecit
What’s real GDP
The country’s output measured in constant prices and so adjusted for inflation.
What gross domestic product (GDP)
The total output produced in a country
How is wealth a consumption determinant
The more wealth people have (in the form of their home, savings account and shares), the more they are willing to spend, increased consumption. Wealth can be spent or used to borrow against - also results in greater consumer confidence.
How is income a consumption determinant
MAIN DETERMINANT ON CONSUMPTION
the larger the amount of income available the more disposable income available for use in spending, increased consumption
The distribution of income is also a factor as the poor spend a larger proportion of income so govt. measures that redistribute income from the rich to the poor are likely to increase consumption
