2.2 Flashcards
What is Aggregate Demand?
Total planned real expenditure on a country’s goods and services produced within an economy in each time period. (the total demand for goods and services within a particular market)
What are the Four Components of Aggregate Demand?
-Consumption/Consumer Spending
-Net Exports (Exports-Imports)
-Government Spending
-Investment
What are examples of the components of AD?
-Household spending on goods and services (C)
-Gross fixed capital investment spending (I)
-Government Spending on Public Services (G)
-Exports of goods and services (X)
-Imports of Goods and Services (M)
What’s the equation for AD?
AD=C+I+G+(X-M)
C-Consumption
I-Investment
G-Government Spending
X-Exports
M-Imports
What are the 18 parts of Aggregate Demand? (split into the 4 sections.
1.Consumption)
-Disposable Income
-Consumer Confidence
-Wealth Effects
-Interest Rates (1/2)
What are the 18 parts of Aggregate Demand? (split into the 4 sections.
2.Investment)
-Business Expenditure
-Economic Growth Rate
-Access to Credit
-Demand for Exports
-Government Influence
-Interest Rates (2/2)
What are the 18 parts of Aggregate Demand? (split into the 4 sections.
3. Government Spending)
-Fiscal Policy
-Trade Cycle Stage
What are the 18 parts of Aggregate Demand? (split into the 4 sections.
4.Exports-Imports)
-Domestic Real Income
-Foreign Real Income
-Exchange rates
-Protectionism
-Non-Price Factors
What are the main factors influencing the level of consumer spending?
-Level of real disposable income (Income Tax)
-Interest Rates/Availability of Credit
-Consumer Confidence (Job prospects)
-Asset Prices
-Household in debt-ness
If Interest Rates decrease what happens to Consumer Spending and therefore Aggregate Demand?
If Interest Rates decrease,Consumer spending increases and do Aggregate Demand increases.
What is Consumer Confidence?
Surveys measure changes in consumer attitudes including expectations of the economic situation and households own financial positions and their views on making major purchases. (a statistical measure of consumers’ feelings about current and future economic conditions, used as an indicator of the overall state of the economy.)
How does deceasing access to credit affect AD?
Decreasing access to credit lowers a firms ability to gain external finance to invest in their factors of production and increase their output.
What are the Four types of Government Expenditure?:
Current Expenditure
Capital Expenditure
Current Transfers
Interest Payements
What is Current Expenditure?
Public Sector Wages
What is Capital Expenditure?
Infrastructure
