Capital accountThis account shows the flow of investment on real or financial assets between a nation and foreigners. |
Circular flow of economic activityA model that shows how households and firms circulate resources, goods and incomes though the economy. This basic model is expanded to include the g and foreign sector. |
Closed economyA model that assumes there is no foreign sector (m and x). |
Comparative advantageA producer has comparative advantage if he can produce a good at lower opportunity cost than all other producers. |
Consumer price index (CPI).The price index that measures the average price level of the items in the base year market basket. This is the main measure of consumer inflation. |
Consumption and savings schedulesTables that show the direct relationships between disposable income and consumption and saving. |
Consumption functionA linear relationship showing how increases in disposable income cause increases in consumption. |
ContractionThe period where real gdp is falling. |
Contractionary fiscal policyDecreases in government spending or higher net taxes meant to shift the aggregate expenditure function downward and shift ad to the left. |
Contractionary monetary policyDesigned to avoid inflation by decreasing ad, which lowers the pl and gdpr. |