theme 2 topic 2- key words Flashcards
learn key terms
What does necessity goods mean?
products and services that consumers will buy regardless of changes in their income levels.
What does risk averse mean?
the tendency to avoid risk
Explain the Laffer curve
the Laffer curve explains that lower tax incentivises people to work more and when the tax rate passes the optimal and is too high people work less and rich people buy and spend money in the cayman islands
What is the role of an exchequer?
the people in-charge of a counties finances
What is the circular flow of income and who is involved?
the circular flow of income is a model of the economy and shows the movement of goods+services between households +firms and their corresponding payments in money terms
Where do commercial banks get their money from?
Central banks
Whats another word for consumer spending?
Consumption expenditure
What are factors of production?
C - capital
E - entrepreneurship
L - land
L - labour
What are capital goods
machinery and things that can help in the production process
What is an injection?
spending in the circular flow that doesn’t come from households
eg investments, exports, government spending
What is withdrawals/leakage?
they correspond wth the 3 injections but do the opposite
eg savings by households, imports, taxes
What is economic equilibrium?
when injections are equal to withdrawals
What does aggregate demand mean?
the total demand for goods and services within a country
What does it mean if prices go up in an AD curve?
its a contraction
What does it mean if prices go down in an AD curve?
its a expansion
