Economics

Money

Velocity of circulation

Price level

When prices are rise but not as quick as they were

when the general level of prices fall

real output what we can prouduce

is nominal values adjusted for the effects of change in the price level

is the value in current year dollars ( the dollars at the time they were spent or earned)

C I G (X-Y)

• consumption
• investment
• Govt spending
• exports - imports

• means mor wages
• prepared to buy more
• prices rise as demand rise
• inflation

when producers have to pay more to produces there goods + services

a decrease in aggregate supply this will cause the AS curve to shift to the left

• rise in import raw materials
• decrease in productivity
• a rise in nominal wages
• a rise in oil
• depreciation in the exchange rate

an increase in aggregate demand

• AD to shift right
• increase in price level

• income rises
• income tax falls
• interest rates fall
• inflationary expectations increase

• interrest rates fall
• business confidence rises

when a company/ business expects sales to increase

when they choose to spend more money

• the exchange rate falls
• economic growth in out trading partners rise

• when income in nz falls
• the exchange rate falls

• increase in productivity
• export less competitive
• harder to reinvest
• speculative rather than product investment
• uncertainty in regard to planning and budgeting

• reduced purchasing power
• discourages saving ( interest rates usually lower than inflation)
• has unequal effects if on fixed income then may resive less money.
• creates fiscal drag if people money rises due to inflation then purchasin power is remained but wages in higher tax brakets
• borrowing encouraged

Quantity of g+ s will fall that we export because overseas buyer will purchase from other country's as cheaper this will create a fall in employment in export sector