can be described as the quantity demanded for all goods and services, within an economy, at a given   and a given time,      , calculated by the formulae:   . 

 price  paribus  ceteris  C+G+I+(X-M)  C+G+I+X  demand  supply  Aggregate 

    - the total value of all   produced goods and services consumed in an economy.

  Total  Private  output / sales  consumption  domestically 

  ( ) can be described as   spending whether by national or local governments. 

 G  spending  sector  private  public  national  Government 

A       occurs when total government expenditure exceeds its revenue.  A   occurs when government revenues exceeds its expenditure.

 budget  deficit  surplus  Budget 

 ( ) - spending by businesses on capital stock.  This includes all goods used to produce other goods and services, e.g. computers for business use, factories, offices and production machinery.  Net investment spending is calculated by total minus . 

 I  investment  total  depreciation  net spending  Investment 

External balance is equal to (  -  ).  This is influenced by a nation's productivity, trade policy,   rate, resource endowment, technology, foreign currency reserves, and consumer preferences - both at home and abroad.

  imports  inflation  real  exports  PPP  exchange 

Aggregate supply - also known as total output, represents the total    of goods and services   within an economy at a given and at an overall   level.

 produced  demand  time  price  output  supply 

    is an unexpected event that impacts on the supply of a product or commodity, resulting in a sudden in price.

shift  shock  change  Supply  supply Aggregate  

Macroeconomic equilibrium is where aggregate   is   to aggregate demand.  When the level of national output is operating above the full employment level of output, the economy has an    .  Similarly, where the level of national output is operating below the full employment level of output, the economy is experiencing a contractionary / gap. 

 equal  inflationary  expansionary  gap  supply  gap  recessionary 

Recession can be described as a period of time when there is a  in GDP for two three   periods. 

 month  fall  GDP  consecutive 

/ neo-classical economists believe that changes to the     determine a country's economic performance.  Such a school of thought supports the view that macroeconomic markets are self   and that any attempt to stimulate aggregate     through government intervention will be   .

 correcting  supply  money  inflationary  contractionary  keynesian  demand  Monetarist 

economics consists of a set of theories focused on total spending in the economy and the effect that spending has on output and inflation.  They believe that increased  expenditure and lower taxes can be used to stimulate   and close a gap.

  demand  government  contraction  Neo-classical  deflationary  Keynesian 

Examples of expansionary     would include decreasing     and / or    government expenditures, implemented to fight recessionary pressures. A decrease in taxes means that households have more disposal     to spend, while a rise in    spending provides and injection into the     of national income.

 circular flowexports income Marginal fiscal policy Average taxesincreasing government  

Examples of     fiscal policy include increasing taxes and / or reducing government expenditures, implemented to fight inflationary pressures.  Both policies take money out of the circular flow of national income.

contractionary expansionary  Monetary  

When a government increases its spending on    payments,    services and other spending items, this   throughout the economy because the money then filters down to other sectors of the economy, as those dependent on the    sector spend their disposable income on goods and services in the economy. 

 transferconsumemultipliespublic  public

When a government reduces the level of   tax or sales tax, private    is encouraged, raising AD.  Likewise a fall in   tax (tax on company profits) will encourage greater   levels.

investmentconsumption corporation  increaseincome 

      occurs when spending by governments in the public sector increases the price of scarce resources. The degree of       in an economy will be determined by the level of       in the economy.

incomespare capacity  multipliesCrowding out investmentcrowdingoutproduction 

Supply side policies - a government can improve the quantity and / or  of its       over time, by for instance, improvements to infastucture such as the building of new dams or roads e.t.c., through   in training and better education, growing a nation’s     base through investment in new machinery and by encouraging , through incentives designed to encourage new businesses to start up.

of  investment  entrepreneurship  quantity  capital  factors  saving  consumption  production costs  production quality 

The keynesian LRAS curve has  distinct sections.  Unlike the classical LRAS curve the economy can be in   at many different points along the LRAS curve.

 two  AS curve  three  equilbrium 

The classical / free market LRAS is perfectly at the equilbrium level of       .  This is because classical economists believe that in the run price level and output are    of each other.

income  inelastic  national  elastic  independent  long  price level