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Flashcards in AD + AS Deck (18)
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1

Aggregate demand

the total spending on an economy's goods and services at a given price level in a given time period

2

Aggregate supply

the total output (real GDP) that producers in an economy are willing and able to supply at a given price level in a given time period

3

Long-run aggregate supply

the total output of a country supplied in the period when prices of FOPs have fully adjusted

4

short-run aggregate supply

the total output of an economy that will be supplied when there has not been enough time for the prices of FOPs to change

5

hyperinflation

a very rapid increase in the price level, may result in people losing confidence in currency

6

consumer price index

an index that shows the average change in prices of a representative basket of products purchased by households

7

disinflation

a fall in the inflation rate ("An increase in price levels at a decreasing rate")

8

inflation

an increase in the average price level and a fall in the value of money

9

real income

money income - inflation

10

inflation rate

the percentage change in the average price level

11

Consumption

this is known as consumer expenditure, it consists of spending by households on goods and services.

12

Investment

this is spending by private sector firms on capital goods

13

Government spending

this covers government spending on the public sector, infrastructure and welfare

14

Net exports

this is the difference between the value of exports of goods and services and the value of imports of goods and services

15

Why is AD downward sloping?

wealth effect
international effect
interest rate effect

16

Formula for CPI (index calculation)

(Data value in year Y / Data value in base year) * 100

17

Cost-push inflation

Inflation caused by increases in costs of production

18

Demand-pull inflation

Inflation caused by increases in AD not matched by equivalent increases in AS