Economic Terms

The amount of money spent on goods and services in the economy at a particular point in time.

Below illustrates how to calculate the total level of expenditure via adding up all the seperate components i.e. consumption, investment, government spending and net exports (exports - imports).

 

UK goods that are sold to other countries - any transaction that generates a positive monetary flow into the UK e.g. Land Rover cars sold abroad or foreign money flowing into the UK financial services industry.

Below is a diagram to show that exports represent an injection into a country's circular flow of income as it is money from other countries being spent on domestically produced goods.

Therefore exports contribute to the aggregate demand curve and if exports increase due to a weaker pound sterling then it will cause the AD curve to shift outwards as shown in the diagram below.

Benefits arising from the consumption of a good or service that is experienced by third parties.

Firms that specialise and develop expert knowledge in specific areas to provide specialist advice and services to firms, businesses and governments

Costs arising from the production of a good or service that are imposed on third parties.

Decreasing average costs due to the positive externalities of an industry or economy growing in size.

Below shows the effects of this type of economies of scale on a firm's long-run average cost curve. For instance the development of infrastructure or the benefits of an expanded local supply network may lead to lower average costs.

Economies and diseconomies of scale that arise because of the growth of the market as opposed to the firm.

External growth is the rate of growth of business, sales expansion by increasing output and business reach by acquiring new businesses by way of mergers, acquisitions and take-overs.

As the diagram shows below there are three different variants of external growth: horizontal integration, vertical integration and conglomerate integration.

A tax on goods imported from other countires.

Costs arising from production or benefits arising from consumption  that are experienced by third parties and are not reflected in the price and output level determined by the market.