Macro Definitions Flashcards
Macroeconomic equilibrium
Situation where aggregate demand = aggregate supply and GDP is constant. Or where injections = leakages in the circular flow, leaving GDP unchanged
Injections
Any money that adds to consumer spending in the circular flow in the form of investment, government spending or exports
Leakages
Any money that is withdrawn from the circular flow in the form of savings, taxes or import spending
Investments
Spending by firms on capital in the form of plant, equipment or machinery
Government spending
Any injection of funds into the circular flow by the public sector
Net exports
The difference between the value of exports and imports (X-M)
GDP
The total value of output produced by an economy in one year
GDP per capita
The total value of output produced by an economy in one year divided by the population
Exports
Any goods or services sold to other nations that results in an inflow of income into the circular flow
Imports
Any purchase of foreign goods and services that leads to an outflow of money from the domestic economy
Current account surplus
When there is a net inflow of earnings resulting from international trade (X>M)
Current account deficit
When there is a net outflow of money resulting from international trade (M>X)
Economic growth
An increase in the value of GDP over one year
Economic growth rate
The percentage increase in the value of GDP over time
Recession
When there are two consecutive quarters of falling GDP
Budget surplus
When the government collect more tax revenue than it spends, enabling it to repay part of the National Debt
Budget deficit
When the government is spending more than it collects in tax revenue thereby adding to the National Debt
Rate of interest
The cost of borrowing or the reward for saving
