Aggregate demand:refers to the total demand for goods and services from all sources in the economy. It including :
*consumer spending
*investment by firms in plant,machinery and stocks
*government spending
*the net effect of international trade, i.e. exports minus imports
so easy to remember - AD=C+I+G+(X-M)
Transfer payments: money treansferred from one person or group to another not in return for any good or service(the best-known transfer payments are pensions and social security payments such as income support.)
Jobseekers' allowance:the benefit paid to someone who is unemployed for the first six months.
trade surplus:the value of exports exceeding the value of imports(X-M=positive)
trade deficit:the value of imports exceeding the value of exports(X-M=negative)
consumer confidence:how optimistic consumers are about future economic prospects.
rate of interest:the charge for borrowing money and the amount paid for lending money.
Net savers: People who save more than they borrow ( clever people )
Wealth: a stock of assets, e.g. property, shares and money held in a savings account.
Inflation: a sustained rise in the price level
Distribution of income: how income is shared out between households in a country.
Saving: Real disposable income minus spending
APC:the proportion of disposable income spent. It is consumer expenditure divided by disposable.
APS:the proportion of disposable income saved.It is saving divided by disposable income.
dissave:spent more than disposable income.
saving ratio:savings as a proportion of disposable income.
*consumer spending
*investment by firms in plant,machinery and stocks
*government spending
*the net effect of international trade, i.e. exports minus imports
so easy to remember - AD=C+I+G+(X-M)
Transfer payments: money treansferred from one person or group to another not in return for any good or service(the best-known transfer payments are pensions and social security payments such as income support.)
Jobseekers' allowance:the benefit paid to someone who is unemployed for the first six months.
trade surplus:the value of exports exceeding the value of imports(X-M=positive)
trade deficit:the value of imports exceeding the value of exports(X-M=negative)
consumer confidence:how optimistic consumers are about future economic prospects.
rate of interest:the charge for borrowing money and the amount paid for lending money.
Net savers: People who save more than they borrow ( clever people )
Wealth: a stock of assets, e.g. property, shares and money held in a savings account.
Inflation: a sustained rise in the price level
Distribution of income: how income is shared out between households in a country.
Saving: Real disposable income minus spending
APC:the proportion of disposable income spent. It is consumer expenditure divided by disposable.
APS:the proportion of disposable income saved.It is saving divided by disposable income.
dissave:spent more than disposable income.
saving ratio:savings as a proportion of disposable income.
Macroeconomic equilibrium: A situation where aggregate demand equals aggregate supply and real GDP is not changing.
The circular flow of income: The movement of spending and income throughout the economy.
Factor services: the service provided by the factors of production.
Leakages: Things that reduce AD; things like imports, savings and taxes.
Injections: additions of extra spending into the circular flow of income.( consisting of: Investments, Government spending and Exports)
If injections equals leakages there will be a macroeconomic equilibrium.
Multiplier effect: The process by which any change in a component of aggregate demand results in a greater final change in real GDP
AD & AS (curve+videos):
Note that the government must shift the AD curve to the right FARTHER than the actual real GDP gap. Why? Because as the AD curve shifts right, prices rise as well.
AS
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