2. How The Macroeconomy Works Flashcards
1
Q
What is aggregate demand?
A
Total planned spending in an economy over a period of time at any given price level
2
Q
What does aggregate demand consist of?
A
- Consumption
- Investement
- Government expenditure
- Net exports (exports - imports)
3
Q
What is the wealth effect?
A
Increases in the value of a households assets cause people to feel wealthier and encourages them to spend more of their current income
4
Q
What is wealth?
A
Refers to the value of the assets held by households. Most wealth will be held in the value of property owned
5
Q
What factors determine aggregate demand?
A
- Consumption
- Investment
- Gov expenditure
- Net exports
6
Q
A
