1.2/3 AGGREGATE DEMAND AND SUPPLY Flashcards
1
Q
What is aggregate demand
A
total value of all the demand in the uk economy
2
Q
what’s the formula for aggregate demand
A
AD = C + I + G + (X-M)
3
Q
what are the determinants of consumption
A
- disposable income
- interest rates
- consumer confidence
- wealth effects
- availability of credit
- inflation
- composition of households
4
Q
what are the determinants of investment
A
- interest rates
- costs
- rate of economic growth
- business confidence
- world economy
- access to credit
- retained profit
5
Q
determinants of government spending
A
- budget
- debt
- taxation
- rate of economic growth
6
Q
determinants of net exports
A
- price
- real income
- exchange rate
- state of world economy
- degree of protectionism
- non price factors eg. quality
7
Q
what is aggregate supply
A
measures the volume of goods and services produced within the economy at a given price level
8
Q
what is short run AS
A
shows output when prices in the economy can change but the FOPs aren’t effected
9
Q
what’s long run AS
A
shows output when both prices and wage rates can change
10
Q
what causes shifts in the AS curve
A
- changes to labour force
- changes in capital stock
- technological progress
changes in productivity - changes in producer taxes and subsidies
- changes in inflation expectations
11
Q
A
