Macroeconomics Booklet Two Flashcards

1
Q

Accelerator Effect

A

When an increase in a component of aggregate demand leads to an increase in investment, triggering a further increase in AD

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2
Q

Aggregate Demand

A

The sum of all planned expenditure in an economy (consumption, investment, government spending and net exports)

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3
Q

Classical Economics

A

The dominant school of thought in economics from the 18th to late 19th centuries, underpinned by a belief in a working of markets and adjustments in price to allocate resources

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4
Q

Consumer confidence

A

Households’ willingness to spend, reflecting their overall optimism about the state of the economy

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5
Q

Consumption

A

Spending by households, also called consumer spending

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6
Q

Disposable income

A

Income after taxes and transfer payments

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7
Q

Interest rate

A

The percentage returned added as a reward on savings and charged on borrowing

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8
Q

Investment

A

Spending by firms on capital

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9
Q

Long run

A

The time period in which all factors of production are variable in quantity

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10
Q

Macroeconomics equilibrium

A

The point at which aggregate demand equals aggregate supply with no tendency for the economy to change

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11
Q

Marginal propensity to consume

A

The proportion of an increase in income that is spent

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12
Q

Marginal propensity to save

A

The proportion of an increase in income that is saved

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13
Q

Multiplier effect

A

When an increase in a component of aggregate demand leads to a more than proportionate increase in real national output

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14
Q

Net exports

A

The value of a country’s exports minus the value of its imports

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15
Q

Public sector

A

The part of the economy that is directly controlled by the government

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16
Q

Recession

A

A fall in real G.D.P for two successive quarters

17
Q

Reverse (negative or downwards) multiplier

A

When a decrease in a component of aggregate demand leads to a more than proportionate decrease in real national output

18
Q

Short run

A

The time period in which at least one factor of production is fixed in quantity