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Aggregate Demand (AD)
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The total amount of spending on gds/srv produced in an economy during a period of time
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Short Run Aggregate Supply (SRAS)
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How much output firms are prepared to supply in the short run, at any given overall price level
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The Multiplier
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The ratio of a change in the [equilibrium real income] to the autonomous change that brought it about
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Output gaps
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The difference between actual real GDP and potential real GDP
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The Circular Flow of Income
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A model of the economy which shows the movement of goods and services between households and firms
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Injections
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Money that flows into the CFY in the form of investment, government spending, and exports
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Leakages
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Money that flows out of the CFY in the form of savings, taxes, and imports
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Income
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The amount of money that is earned during a period
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Wealth
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The accumulated value of all assets, such as property or land
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Gross Domestic Product (GDP)
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A measure of the economic activity carried out in the domestic economy over a period
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Gross National Income
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GDP plus net income from abroad
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Recession
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Occurs when GDP falls for two or more consecutive quarters
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Inflation
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The rate of increase in the average price level in an economy
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Deflation
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A fall in the average level of prices
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Disinflation
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A fall in the rate of inflation
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Consumer Price Index (CPI)
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A measure of the general level of prices in the UK
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Retail Price Index (RPI)
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A measure of the average level of prices in the UK
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The Balance of Payments (BOP)
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A set of accounts showing the transactions conducted between residents of a country and the rest of the world
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The Current Account
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A measure of the flow of funds from trade in goods/services and other income flows
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The Financial Account
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...
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Fiscal Policy
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The decisions made by the government on its expenditure, taxation, and borrowing
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Monetary Policy
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The decisions made by the government regarding the money supply and the interest rates
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Supply side policies
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A range of measures intended to have a direct impact on aggregate supply, in particular the potential capacity output of an economy
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Market based polices
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Policies that rely on allowing markets to work more freely and providing incentives for enterprise and initiative
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Interventionist policies
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Policies by which the government intervenes to stimulate AS
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