How the macroeconomy works

• Accelerator: A change in the level of investment into capital goods, brought about by a growth of aggregate demand.
• National capital stock: Stock of capital in the economy.
• Aggregate demand: Total planned spending on real output produced by the economy.
• National income: The flow of new output produced by the economy.
• National output: The same as national income.
• National product: The same as national income.
• Pro-free market economists: Opponents of Keynesian economists, who believe the government should generally leave the markets to operate freely.
• Real GDP: GDP measured, taking into account the effects of inflation
• Keynesian economists: Followers of the economist John Maynard Keynes, who believe the government should generally manage the economy.
• Injection: Spending power entering the circular flow of income resulting from investment, government spending and exports.
• Long run aggregate supply (LRAS): Aggregate supply when the economy produces its productive potential.
• Monetarists: Economists who believe increases in the money supply is a significant factor of inflation.
• Real wage unemployment: Unemployment caused by real wages being stuck above the equilibrium wage rate.
• Short run aggregate supply (SRAS): Aggregate supply when the level of capacity is fixed, though existing factors can be utilised more or less to impact real output.
• Short run economic growth: An increase in the real output by taking up slack in the economy.
• Trend growth rate: The level of economic growth that is sustainable, without putting upward pressure on inflation.
• Technological progress: When technological change results in more output for the same quantity of input.
• Withdrawal: Spending power exiting the circular flow of income resulting from savings, taxation and imports.