2.2 Aggregate demand (AD)

Question 1

a) Components of AD: C+I+G+(X-M)

Question 2

b) The relative importance of the components of AD

Question 3

c) The AD curve

Question 4

d) The distinction between a movement along, and a shift
of, the AD curve

Question 5

a) Disposable income and its influence on consumer
spending

Question 6

b) An understanding of the relationship between savings
and consumption

Question 7

c) Other influences on consumer spending:

Answer 7

o interest rates
o consumer confidence
o wealth effects

Question 8

a) Distinction between gross and net investment

Question 9

b) Influences on investment:

Answer 9

o the rate of economic growth
o business expectations and confidence
o Keynes and ‘animal spirits’
o demand for exports
o interest rates
o access to credit
o the influence of government and regulations

Question 10

a) The main influences on government expenditure:

Answer 10

o the trade cycle
o fiscal policy

Question 11

a) The main influences on the (net) trade balance:

Answer 11

o real income
o exchange rates
o state of the world economy
o degree of protectionism
o non-price factors