Key Terms Flashcards
1
Q
An increase in consumer spending is partly due to an increase in disposable income
A
Marginal Propensity to Consume
2
Q
disinflation
A
A decrease in the rate of inflation. NOT DEFLATION
3
Q
Aggregate Demand
A
total of all demands and expenditures in the economy at any given price
4
Q
equation for AD
A
C + I + G + (X-M)
5
Q
equation for MPC
A
change in income
6
Q
real GDP
A
GDP adjusted for inflation
7
Q
nominal GDP
A
calculated using current prices, it does not require any adjustments for inflation.
8
Q
Wealth effect
A
the change in consumption following a change in wealth
9
Q
consumption
A
total expenditure by households on goods and services over a period of time
10
Q
Market Failure
A
Occurs when freely functioning markets fail to allocate scarce resources in a way that optimises social welfare
