Macroeconomics Theme 2 Flashcards
What is Income
Measures the flow of money a person or economy receives each year
What is Wealth
The sum, or stock, of all your assets
What are assets
Items that you can buy or own
What are the Factors of production
Land
Labour
Capital
Enterprise
National income = National expenditure = National output
What does GDP measure
It measures national output
What are Withdrawals/leakages
Taxes
Imports
Savings
What is Circular flow model
Firms buy factors of production, such as labour and land from households. In return the households pay factor income, which is wages and rent. Then households spend their income on the firms for goods and services
AD formula
C + I + G + (X-M)
Net investment formula
Net investment = Gross investment - Depreciation
What happens to the AD curve when price level decreases
There is an extension in AD
What happens to the AD curve when price level increases
There is a contraction in AD
