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Aggregate Demand
The total demand for goods and services in an economy.
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Aggregate Supply
The total supply of goods and services in an economy.
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Crowding In
When government spending induces private investment.
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Crowding Out
When government spending reduces private investment.
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Demand Curve
A schedule that relates price to quantity demanded.
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Disposable Income
Income that may be spent after taxes are subtracted.
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Exogenous
A change resulting from conditions outside of an economic model.
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GDP
Gross domestic product is the total value of all goods and services produced within an economy.
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Income
Money taken in by a system, an individual, a firm, or an economy.
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Inflation
The year-to-year increase in the price level.
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Marginal Propensity to Consume
A number that describes the amount of an additional dollar of income that a consumer will spend rather than save.
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Money Supply
The total amount of currency and demand deposits that exists in an economy.
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National Income
The total amount of money earned in an economy in a year. C.f. GDP.
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Net Exports
The difference between exports and imports.
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Nominal Interest Rate
The cost of borrowing money, unadjusted for inflation.
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Nominal Value
The value of something in current currency, unadjusted for inflation.
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Output
The amount of goods and services produced in an economy. This can be in quantity or in currency.
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Price Level
The overall level of prices within an economy.
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Real Exchange Rate
The rate that goods and services of one country can be traded for goods and services of another country.
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Real Interest Rate
The cost of borrowing money, adjusted for inflation.
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Real Value
The value of something in constant currency, adjusted for inflation.
Terms
Formulae
Formula for Output or income | Y = C(Y - T) + I(r) + G + NX(e) = basic equation for aggregate demand = IS curve equation |
LM curve equation | M/P = L(r,Y) |