2.2 aggregate demand

Question 1

what is the shape of your bogstandard demand curve

Answer 1

downward, where price and units sold are the x and y axis. As price goes up, less people are willing to pay that to buy it

Question 2

define aggregate demand

Answer 2

“The total demand for all goods and services in an economy at any given price level over a period of time”.

Question 3

4 components of aggregate demand

Answer 3

consumption
investment
govt spending
net exports

AD: C + I + G + (X-M)

Question 4

wordy formula for aggregate demand

Answer 4

nominal national output / avg. price level

Question 5

how does a change in price affect the AD curve

Answer 5

contraction or expansion, moving around on the line

Question 6

how does a change in the components of AD impact the curve

Answer 6

a shift in the AD curve & thus a whole new system

Question 7

3 main things that determine the level of consumption in a household

Answer 7

disposable income

interest rates

confidence

Question 8

3 main things that impact ones marginal propensity to save

Answer 8

interest rates

consumer confidence

inflation

Question 9

what is net investment

Answer 9

spending on capital assets eg. buildings, machinery

increases the productive capacity of the economy leading to economic growth

Question 10

what is liquidity

Answer 10

when a firm declares bankrupt and has to liquidate their assets

Question 11

what is monetary policy

Answer 11

the steps taken by the bank of england to influence the economy through interest rates

Question 12

2 main things that influence govt expenditure

Answer 12

the trade cycle & fiscal policy