3 - aggregate demand

aggregate demand is the

total demand for goods + services produced in the economy, at a certain price level, in a certain time period

equation

AD = C + I + G + (X-M)

Aggregate Demand = Consumption + Investment + Government + Net exports

effective demand

• total demand for goods/services in an economy at a given time

• that is backed by the ability/willingness to pay

wealth

stock of assets with monetary value 🏠🚗

interest

cost of borrowing/reward for saving

gini coefficient

• measure of inequality

• 0.34

marginal propensity to consume (MPC)

• proportion of additional income allocated to consumption

• change in consumption / change in income (aka gradient)

• as income increases people consume more, but to a point. they will save

• between 0-1 (above 1 means consumption bigger than income)

marginal propensity to save (MPS)

• proportion of additional income allocated to savings

windfall

• large amount of money that someone unexpectedly comes into