OCR A LEVEL MACRO DEFINITIONS

circular flow of income

a model of the economy where exchanges are represented as flows of money between firms and households, for goods and services and factor payments and factors of production between economic agents.

leakage

income flows out of the circular flow of income

saving

income that is not spent by households and firms

taxation

flow of income to the government taken from firms and households as tax revenue

imports

total spending by domestic buyers on goods and services produced externally

injections

income flows into the circular flow of income of an economy

investment

total spending on capital goods by firms

government spending

total spending on goods and services by the government

exports

total spending on goods and services produced in the domestic economy by external buyers

aggregate demand

the total spending on domestically produced goods and services in an economy over a given period of time

GDP

total value of final goods and services/output produced within an economy over a given period of time

GNI

total income earned by residents of a country from both the domestic economy and from abroad in a given period of time

macroeconomic equilibrium

achieved when withdrawals from the circular flow equals injections into the circular flow, where aggregate demand equals aggregate supply

nominal value

expressed in current prices

real values

adjusted for the effects of inflation, expressed in constant prices

consumer expenditure/consumption

total spending by households on goods and services in an economy over a given period of time

investment

total spending by firms on capital goods in an economy over a given period of time

net exports

total value of imports subtracted from the total value of exports over a given period of time