AP Macro Unit 2 Flashcards

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Aggregate income (AI)

Back

The sum of all income (Wages + Rent + Interest + Profit) earned by suppliers of resources in the economy.

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Aggregate spending (GDP)

Back

The sum of all spending from four sectors of the economy.

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Base year

Back

The year that serves as a reference point for constructing a price index and comparing real values over time.

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Business cycles

Back

Refer to the fluctuations in economic activity over time.

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Circular flow of economic activity

Back

A model that shows how households and firms circulate resources, goods, and incomes through the economy.

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Closed economy

Back

A model that assumes there is no foreign sector (imports and exports).

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Consumer price index (CPI)

Back

The price index that measures the average price level of the items in the base year market basket.

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Consumer spending (C)

Back

Spending done by customers.

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Consumer substitute

Back

As the price of goods begins to rise, consumers seek substitutes.

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Consumers

Back

People who buy the goods/services in an economy.