Econ definitions

What are leakages in the context of the circular flow of income?

Savings, taxes, and import expenditure that remove spending from the circular flow of income.

What are injections in the circular flow of income?

Investment, government expenditure, and export revenues that add spending to the circular flow of income.

How does exceeding injections or leakages affect the economy?

Economy grows. Conversely, if leakages exceed injections, the economy contracts.

What is Gross National Income (GNI)?

Income earned by all national factors of production regardless of location, equal to GDP plus net income from abroad.

What is the relationship between GNI and GDP?

If GNI is greater than GDP, it means more income is earned abroad than foreign income earned in the domestic country.

How is GDP per capita calculated?

Dividing the total money value of all goods and services produced within a country by the population.

What does the aggregate demand curve represent?

Shows the planned level of spending on domestic output at different price levels.

What characterizes short run aggregate supply (SRAS)?

Depicts the relationship between the price level and the quantity of real output produced by firms when resource prices do not change.

Define recessionary gap in economic terms.

Occurs when equilibrium real GDP lies to the left of potential GDP, with unemployment greater than the natural rate.

What is inflation?

Sustained increase in the average level of prices over time as measured by a consumer price index.

What leads to demand-pull inflation?

Occurs when aggregate demand rises faster than the economy's ability to supply goods and services, leading to excess demand.

What is stagflation?

Characterized by an increase in the price level alongside a decrease in real GDP/output.

What is disinflation?

Decrease in the rate of inflation, indicating that inflation rates are becoming closer to normal levels.

What happens during a wage-price spiral?

Occurs when rising prices lead to higher wage demands, which in turn leads to further price increases.

What defines underemployment?

Refers to people of working age who have part-time jobs when they would prefer full-time work or jobs that do not fully utilize their skills.