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