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Flashcards in Word Definitions Deck (11)
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1
Q

Investment

A

The addition to the capital stock of the economy

2
Q

Accelerator theory

A

The theory that the level of planned investment is related to past changes in income

3
Q

Capital output ratio

A

The ratio between the amount of capital needed to produce a given quantity of goods and the level of output

4
Q

Marginal efficiency of capital

A

The rate of return on the last unit of capital employed

5
Q

Retained profit

A

Profit kept back by a firm for its own use which is not distributed to shareholders or used to pay taxation

6
Q

Aggregate demand

A

The total of all demands of expenditures in the economy at any given price

7
Q

Multiplier

A

A figure used to find the final change in income after an investment.

8
Q

Full capacity

A

The level of output where no extra production can take place in the long run with existing resources. The full capacity is shown by the classical long run AS curve.

9
Q

LRAS curve

A

Assumes wage rates are variable both upwards and downwards

Classical/supply side economists: wage rates flexible

Keynesian: may be ‘sticky downwards’ so economy may operate at less than full employment even in the long run

10
Q

SRAS curve

A

Assumes money wage rates are fixed

11
Q

Supply side shocks

A

Factors such as changes in wage rates/commodity prices which cause the short run AS curve to shift