Macro 3 Flashcards
What is Aggregate ?
Total sum of
What are Capital goods ?
Goods used to make consumer goods
What are consumer goods ?
Goods and services are products which satisfy our needs and wants directly
What is aggregate demand ?
Is the total demand or expenditures at any given price in a given time period
What is the national expenditure ?
One of the three ways to calculate national income usually measured as GDP
What is national expenditure made up of ?
Consumption
Investment
Government spending
Exports - imports
What is consumption (c)?
Spending by households or goods and services
What is investment (I) ?
Spending by firms or investment goods
What is government spending (G) ?
Includes current spending for instance on wages and salaries. Also includes spending on investment goods such as new roads
What are net imports ?
Foreigners spend money on goods produced domestically but households , firms and govt also spend money on goods produced abroad.
How to calculate net imports ?
Exports - imports
How to calculate AD
C+I+G + (X-M)
What create shifts in AD ?
Expectations , tax , population size , interest rate , exchange rate
what’s the wealth effect ?
If price levels fall the purchasing power of wealth increases so consumers demand more. Business invest more
What is interest rate effect ?
If I the price level is relatively low , interest rates tend to be relatively low which encourages more investment
