Ch 13 - The Level of Economic Activity

Imports

________ are a leakage (income that is spent and not returned to firms)

Investments

________ allow the amount of income circulating in the economy to rise.

Firms

________ have access to savings by borrowing money from banks.

Macroeconomics

________: larger scale economy which is concerned with the allocation of a nations resources.

Output method

________: actual value of the goods and services produced.

circular flow of income

It is the money that escapes an economy in a(n) ________.

Macroeconomics

larger scale economy which is concerned with the allocation of a nations resources

GDP

monetary value of all of the final goods and services produced in a year in a country

Leakages

a diversion of funds from a process

Real GDP

GDP which has been adjusted for inflation

Trough

when contraction comes to an end, aggregate demand will pick up and enter recovery phase

Negative output gap

economy producing below its trend and unemployment will is likely to be an issue

**Output method**

actual value of the goods and services produced 

**Income method**

measures the value of all the incomes earned in the economy 

**Expenditure method**

measures the value of all spending on goods and services in the economy

**GDP**

monetary value of all of the final goods and services produced in a year in a country

**Leakages**

a diversion of funds from a process. It is the money that escapes an economy in a circular flow of income 

**Injections**

introduction of income into the flow

**The business cycle**

its fluctuations in economic activity are measured by changes in real GDP

**Recovery**

Economic expansion driven by aggregate demand as households + consumers spend more

**Boom**

Increased demand for goods and services pushes up average price (inflation)

**Recession**

Two consecutive quarters of negative GDP growth

**Trough**

when contraction comes to an end, aggregate demand will pick up and enter recovery phase

Positive output gap

economy producing above its trend and inflation is likely to be an issue