economic activity

• Supply refers to the quantity of a good or service that producers are willing to offer at a given price.
• Demand is the relationship between the quantity demanded by consumers and its corresponding price, with other factors held constant.
• Factors affecting supply include changes in input costs, technology, government policies, and expectations about future market conditions.
• The law of demand states that as prices increase, the quantity demanded decreases, while if prices decrease, the quantity demanded increases.
• The determinants of consumption are interest rates, expected future income and consumer confidence.
• The multiplier effect is when an increase in injections can cause a final increase in national income than the initial flashcards.
• Calculating the multiplier effect is change in national income / change in injections.
• Calculating multiplier effect in a closed economy is 1 / 1-MPC or 1 / MPS
• Calculating multiplier effect in a closed economy with GOVT is 1/1-MPC or 1/MPS+MPT
• Calculating multiplier effect in an open economy is 1/1-MPC or 1/MPS+MPT+MPM or 1/MPW
• The accelerator effect is an increase in the rate of change in national income which causes an increase in the rate of investments.
• The accelerator effect happens because the economy is growing and disposable income increases which leads to more consumer spending and businesses are more confident so they invest more.
• Economic activity refers to the consumption and production of goods and services within an economy.