Economics: Topic 8, Year 2 Definitions

The planned spending by households on goods and services.

Illustrates the relationship between consumption and real income.

A model that shows how money flows within a simplified economy, with households and firms as key components.

The proportion of any additional income that is spent on consumption.

A process through which any change in a component of aggregate demand results in a magnified change in real GDP or national income.

The proportion of any additional income that is not passed on within the circular flow.

The total quantity of output that producers in an economy are willing to supply at specific price levels over a period of time.

Measures the efficiency with which inputs are transformed into outputs.

The minimum amount of capital (expressed in percentage terms) that banks must hold in comparison to the amount they have lent. The current figure in the UK is 3%.

Organisations that operate with the intention of protecting and enhancing the working conditions and financial positions of their members.

Exist when firms make less use of permanent full-time employees and rely more on part-time and temporary employees to supply goods and services.

Refers to economic theories based on the work of the British economist John Maynard Keynes (1883-1946).