Chapter 4 Economics` vocab

Aggregate demand : total demand of a country`s goods and services at a given price level and in a given time period.

AG = C + I + G + ( X - M )
aggregate demand = consumer expenditure + investment + government spending + ( export - import )

Consumer expenditure : spending by household on consumer products. ( clothing, food..)
investment : spending on capital goods. ( machines , office building..)
government spending : spending by central government and local government on goods and services.

Transfer payments : money transferred from one person or group to another not in return for any good or service.

Job seeker`s allowance : a benefit paid by the government to those unemployed and trying to find a job.

Trade surplus : the value of exports exceeding the value of imports.
Trade deficit : the value of imports exceeding the value of exports.

Consumer confidence : how optimistic consumers are about future economic prospects.

Average propensity to consume : the proportion of disposable income spent. It is consumer expenditure over disposable income.

Inflation : a sustained rise in the price level.

Saving : real disposable income minus spending. (real disposable income is disposable income after inflation.)
Average propensity to save : the proportion of disposable income saved. It is saving divided by disposable income.

Target saver : who save with a target figure in mind.

Dissave : spending more than disposable income.

Capacity utilisation : the extent to which firms are using their capital goods.
Corporation tax : a tax on firm`s profits.
Retained profits : profit kept by firms to finance investment.
Unit cost : average cost per unit of output.

Real GDP : GDP after inflation.
Gross Domestic Product GDP : total output of goods and services produced in an country.

Tariff : tax on imports.

Government bond : a financial asset issued by the centrel or local government means of borrowing money.

Aggregate demand : the total amount that producers in the economy are willing to supply in a given prices level in a given time period.

Privatisation : transfer of assets from the public to private sector.

Macroeconomic equilibrium : a situation when aggregate demand equals aggregate supply and real GDP is not changing.

Circular flow of income : the movement of spending and income throughout the economy.

leakage : withdrawals of possible spending from the circular flow of income.

Injection : addtions of extra spending in the circular flow of income.

Multiplier effect : the process by which any change in component of aggregate demand results a greater final change in real GDP.

Overheating : the growth in aggregate demand outstripping aggregate supply, resulting in inflation.

Output gap : the difference between an economy`s actual and potential real GDP.
A negative / positive output gap occures when potential output is above/below the actual output.
An country with positive output gap usually experience inflation.


I seriously think chapter 4 is more diffcult than the preivous.