vocab Flashcards
circular flow of income
model of the economy which shows the flow of goods, services and factors and their payments around the economy
closed income
an economy where there is no foreign trade
income
rent, interest, wages and profits earned from wealth owned by economic actors
closed economy
an economy where there is no foreign trade
injections
in the circular flow of income, spending which is not generated by household including investment, government spending and exports
national income
the value of the output, expenditure or come of an economy over a period of time
open economy
an economy where there is a trade with other countries
wealth
a stock of assets which can be used to generate a flow of production or income. for example, physical wealth such as factories and machines is used to make goods and services
withdrawals/leakages
in the circular flow of income, spending by households which does not flow back to domestic firms. It includes saving, taxes and imports
national output
the value of the flow of goods and services from firms to households
national expenditure
this is the value of spending by households on goods and services.
factor services
the services provided by the factors of production.
aggregate
the sum or total
aggregate demand
the total demand for a country’s goods and services at a given price level and in a given period of time
aggregate demand curve
shows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls .
price level
average of each of the prices of all the products produced in an economy
consumer expenditure
spending by households on consumer products
consumer goods
goods and services that are used by people to satisfy their needs and wants
investment
spending on capital goods
capital goods
goods that are used in the production of other goods such as factories, roads, machines and equipment
government spending
spending by the central governments and local government on goods and services
exports
products sold abroad
imports
products brought from abroad
net exports
value of exports minus the value of imports
transfer payments
money transferred from one person or group to another not in return for any goods or service
job seekers allowance
benefit paid by the government to those unemployed and trying to find a job
trade surplus
the value of exports exceeding the value of imports
trade deficit
the value of imports exceeding the value of exports
consumer confidence
how optimistic consumers are about future economic prospects
rate of interest
the charge for borrowing money and the amount received for lending money
average propensity to consume
the proportion of disposable income spent it is consumer expenditure divided by disposable income
net savers
people who save more than they borrow
distribution of income
how income is shared between households in a country
inflation
a sustained rise in the price level
saving
real disposable income minus spending
average propensity to save
the proportion of disposable income saved, it is saving divided by disposable income
dissave
spending more than disposable income
savings ratio
savings as a proportion of disposable income
capacity utilisation
the extent to which firms are using their capital
corporation tax
a tax on firms’ profit
retained profits
profits kept by firms to finance investment
unit cost
average cost per unit of production
real GPD
the country’s output measured in constant prices and so adjusted for inflation
gross domestic product
total output of goods and services in a country
exchange rate
the price of one currency in terms of another currency
aggregate supply curve
the relationship between the average price level in the economy and the level of total output
full capacity
where no extra production can take place in the long run with existing resources
long run aggregate supply
the aggregation of supply curves which assumes wage rates are variable both upwards and downwards
short run aggregate supply
the upward sloping supply curve which assumes that money wage rates are fixed
supply side shocks
factors such as changes in wager rates or commodity prices, which cause the short run aggregate supply curve to shift
macroeconomic equilibrium
a situation where aggregate demand equals aggregate supply and real GDP
multiplier effect
the process by which any change in a component of aggregate demand results in a greater final change in real GDP
marginal propensity to save
the increase in saving divided by the increase in income that caused it
marginal propensity to tax
the increase in tax revenues divided by the increase in income that caused them
marginal propensity to withdraw
MPS+MPT+MPM
multiplier
the figure used to multiply a change in an injection into the circular flow, such as investment
accelerator theory
the theory that the level of investment is related to past changes
