Circular Flow of Income Model Flashcards
What are the two main markets in the short-term economy?
The Goods Market and the Money Market.
What economic participants are depicted in this model?
Households, Firms, Government, and Foreign Counterparts.
What is Aggregate Demand?
Aggregate Demand is the total demand for goods and services within an economy.
What affects Aggregate Demand in the short term?
Expectations influence Aggregate Demand in the short term.
What characterizes the medium term in this economic model?
The Labour Market, where Wage Setting and Price Setting take place, along with the Aggregate Supply-Phillips Curve.
How do Expectations affect the medium-term economy?
Expectations can influence Wage Setting, Price Setting, and the Phillips Curve in the medium term.
What is at the center of this economic model?
Economic Growth is at the center of this model.
What influences Economic Growth according to this model?
Expectations, Production Technology, and Other Factors influence Economic Growth.
What contributes to economic growth in the long term?
Production Technology and Other Factors contribute to long-term economic growth.
What is the Phillips Curve?
The Phillips Curve shows the relationship between inflation and unemployment.
