macro aggregate demand key terms Flashcards
what is economic growth?
long term expansion of productive potential
what is circular flow?
model of the economy in which major exchanges are represented as flows of money, goods and services between economic agents
what is an injection?
exports, government spending, investment
what is a leakage (withdrawal)?
tax, savings, imports
what does cyclical mean?
up+down
what do interest rates do to demand?
dampens down demand
what is aggregate demand?
total level of planned real expenditure on goods and services produced within a country
what is disposable income?
income after deduction of taxes
what influences consumption?
rate of interest, disposable income, wealth, availability of credit, consumer cofnidence
aggregate demand key termswhat are the components of aggregate demand?
1) household spendign on goods and services (C) consumption- household spending
2) gross fixed capital investment spending (I)(net investment) takes into account of depreciation
3) government consumption (G) (public services)
4) exports of goods and services (X) (net exports)
5) (minus) imports of goods and services (M) (imports)
equation of aggregate demand
AD=C+I+G+(X-M)
what are the influences of investment on AD?
rate of interest, business expectations/ confidence, access to credit, demand for exports, government
what percentage does consumption hold in overall AD?
biggest component of AD 60-65%
what are the influences of government expenditure on AD?
economic cycle, tax, fiscal policy/ automatic stabilisers
what is a budget deficit?
when gov spending is higher than tax revenue
