How the Macroeconomy Works, Circular Flow of Income, AD/AS Analysis and Related Concepts Flashcards
Accelerator
A change in the level of investment into capital goods, brought about by a growth of aggregate demand.
Actual output
Level of actual output produced in the economy in a year.
Aggregate demand
Total planned spending on real output produced by the economy.
Aggregate supply
Total real national output.
Autonomous consumption
The minimum level of consumption in society needed to sustain a basic standard of living.
Boom/Bust Policy
When the government enacts policies to stimulate then contract the economy.
Circular flow of income
The circulation of national income, output and expenditure between economic agents, such as firms and households.
Credit crunch
Low availability of credit; when borrowing becomes (significantly) more expensive.
Full employment income
Total output of an economy when output is minimised
Funding for Lending Scheme (FLS)
Scheme allowing banks to borrow cheaply from the Bank of England, on the condition that they lend the money out to promote economic growth.
Gross domestic product (GDP)
The sum of all goods and services produced in an economy over a period of time.
Injection
Spending power entering the circular flow of income resulting from investment, government spending and exports.
Keynesian economists
Followers of the economist John Maynard Keynes, who believe the government should generally manage the economy.
Long run aggregate supply (LRAS)
Aggregate supply when the economy produces its productive potential.
Monetarists
Economists who believe increases in the money supply is a significant factor of inflation.
