2.2/2.3 Aggregate Demand & Supply

Question 1

Define and Formulate aggregate demand

Answer 1

Total level of expenditure on the goods and services produced within a country
AD = C + I + G + (X-M)

Question 2

List the 5 factors that effect consumer spending

Answer 2

Disposable Income
Rate of savings
Interest Rates
Consumer confidence
Wealth

Question 3

Explain the difference between net and gross investment

Answer 3

Gross - Total capital spending
Net - Gross investment less depreciation

Question 4

List the 6 factors that effect Investment

Answer 4

Rate of economic growth
Business confidence/Animal spirits
Demand for exports
Interest rates
Access to credit
Government regulations

Question 5

Explain how government spending may change at different stages of the trade cycle

Answer 5

Boom - Gov spending decreases
Recession - Gov spending increases

Question 6

List the 5 factors that effect the trade balance

Answer 6

Real incomes
Exchange rates - SPICED
State of world economy
Degree of protectionism
Non-price Factors

Question 7

List the factors that effect SRAS

Answer 7

Wages
Technology
Exchange rates
Materials
Productivity

Question 8

List the factors that effect LRAS

Answer 8

Q^2CELL

Question 9

Draw a Kensyian and Classical LRAS curve

Answer 9

refer to powerpoint