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22 Cards in this Set
- Front
- Back
Aggregate demand (RGDP) |
Total demand for all goods and services |
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Domestic consumption |
Denoted as C, and represents 70% of all GDP |
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Disposable income |
Denoted as DI, and is GDP - taxes + transfer payments |
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Real disposable income |
Denoted as RDI. Price adjusted disposable income. Disposable income divided by potential income |
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Real domestic consumption |
Price adjusted domestic consumption. Domestic consumption divided by potential income |
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Consumption function |
As real disposable income increases, domestic consumption increases |
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Marginal propensity to consume (MPC) |
Denoted as B or MPC. Is the amount of money one is expected to spend based off of their real disposable income |
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Total spending |
The sum of C + I + G |
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Demand side equilibrium |
When total spending equals C + I + G + (X-IM) |
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Trade deficit |
When (X-IM) > 0 and X >IM |
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Trade surplus |
When (X-IM) < 0 IM >X |
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Over simplified multiplier formula |
1/1-mpc |
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Nominal wage |
Non price adjusted wage |
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Real wage |
Price adjusted wage |
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Recessionary gap |
"AS" shifts to the right |
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Inflationary gap |
"AS" shifts to the left |
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Shortage |
When demand is higher than supply. This causes prices to rise This also prompts an increase in quantity |
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Surplus |
When supply is higher than demand This causes an increase in price This will cause quantity to decrease |
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Elasticity of demand |
Change in Price's impact on quantity demanded % change in Q / % change in P Q = quantity P = price |
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Multiplier |
Means, If you spend an extra dollar in this economy, given the MPC, how much will that increase total output |
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Supply shock |
Things that shift "AS" |
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Stagflation |
Recession and inflation occurring at the same time |