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Level 10

Macroeconomics Schedule C: Circular Flow of Income

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Aggregate Demand
the total demand for a country's goods and services at a given price level and in a given time period
Price level
The average of the prices of all the products produced in an economy
consumer expenditure
spending by households on consumer products
Spending on capital goods
Government spending
Spending by the central bank and local government on goods and services
products sold abroad
Products bought from abroad
Net exports
The value of exports minus the value of imports
Multiplier effect
The process by which any change in a component of aggregate demand results in a greater final change in real GDP
Rate of interest
The charge for borrowing money and the amount paid for lending money
A sustained rise in the price level.
Average propensity to save
the proportion of disposable income saved.
Average propensity to consume
the proportion of disposable income spent.
Capacity utilisation
the extent to which firms are using their capital goods
corporation tax
a tax on firms' profits
Real GDP
The country's output measured in constant prices and so adjusted for inflation
Gross domestic product
The total output of goods and services produced in a country
Aggregate Supply
the total amount that producers in an economy are willing and able to supply at a given price level in a given time period
Macroeconomic equilibrium
A situation where aggregate demand equals aggregate supply and real GDP is not changing
Circular flow of income
the movement of spending and income throughout the economy
Withdrawals of possible spending from the circular flow of income
Additions of extra spending into the circular flow of income