Macroeconomics - AD and AS

Material Living Standards

Based on goods, services, and income; influenced by GDP per capita, income distribution, employment, inflation, and access to goods.

Non-Material Living Standards

Includes quality of life factors such as happiness, health, environmental quality, crime rates, leisure time, and education.

Gross Domestic Product (GDP)

The market value of all final goods and services produced within a country.

Business Cycle

The cyclical pattern of economic activity that includes phases of expansion, peak, contraction, and trough.

Expansion Phase

A phase of the business cycle characterized by increasing GDP, falling unemployment, and rising inflation.

Contraction Phase

A phase of the business cycle marked by slowing GDP, rising unemployment, and declining inflation.

Aggregate Demand (AD)

The total spending in the economy, comprising consumption, investment, government spending, and net exports.

Leakages

Withdrawals from the economy, including savings, taxes, and imports.

Injections

Additions to the economy, including investment, government spending, and exports.

Factors Affecting Aggregate Supply (AS)

Includes resource availability, production costs, technological advancements, climate conditions, and government regulations.

Monetary Policy

Government policy that involves adjusting interest rates to control economic activity.

Fiscal Policy

Government policy regarding taxation and spending to influence economic conditions.

Stagflation

An economic situation characterized by high inflation and unemployment occurring simultaneously.

Equitable Income Distribution

The fair allocation of income across the population.

Trade-offs in Economic Policy

The balance between policies that promote economic growth and those that ensure environmental and social equity.