Glossary
Aggregate Demand (AD)
The total demand for all goods and services produced in an economy at a given price level and in a given time period.
Example:
A government stimulus package that increases consumer spending and business investment would shift the aggregate demand curve to the right.
Currency Appreciation
A country's currency becomes stronger relative to other currencies, meaning it can buy more foreign goods or currency.
Example:
If the U.S. dollar appreciates against the Euro, a $100 pair of American jeans now costs fewer Euros for a European buyer.
Currency Depreciation
A country's currency becomes weaker relative to other currencies, meaning it buys less foreign goods or currency.
Example:
If the British Pound depreciates against the U.S. dollar, a British tourist will find their money buys fewer dollars, making a trip to New York more expensive.
Exports
Goods and services produced domestically and sold to buyers in other countries.
Example:
When a German company buys software developed in India, that software is an export for India.
Imports
Goods and services produced in other countries and purchased by domestic buyers.
Example:
If an American consumer buys a car manufactured in South Korea, that car is an import for the U.S.
Net Exports
The total value of a country's exports minus the total value of its imports, representing the foreign component of aggregate demand.
Example:
If Japan exports 400 billion in oil and food, its net exports are $100 billion.
Output
The total quantity of goods and services produced in an economy, typically measured as Real Gross Domestic Product (Real GDP).
Example:
If a country's factories are running at full capacity and unemployment is low, its economic output is likely high.
Price Level
The average of current prices across the entire spectrum of goods and services produced in an economy.
Example:
If the Consumer Price Index (CPI) rises significantly, it indicates an increase in the overall price level, often referred to as inflation.
Unemployment
The state of being jobless while actively seeking employment and willing to work.
Example:
During a recession, many businesses cut back, leading to a rise in the unemployment rate as people lose their jobs.