2.2.1 - Aggregate Demand Flashcards
1
Q
What is aggregate demand
A
Total real expenditure on goods and services produced within a country in a given time period
2
Q
What are the components of aggregate demand
A
- consumption (C)
- Investment (I)
- Government spending (G)
- Exports (X)
- Imports (M)
3
Q
The real income effect
A
- price level falls
- real value of income rises
- consumers able to buy more of what they want or need
4
Q
The balance of trade effect
A
- price level decreases
- exports become more competitive
- greater demand
- greater export revenue
5
Q
The interest rate effect
A
- price level decreases
- interest rates kept lower
- stimulates high consumption/investment
6
Q
External shocks affecting aggregate demand
A
- rise or fall in value of exchange rate
- a recession in a nations key trading partner
- slump in the housing market/construction sector
- events such as global financial crisis
- global health crisis such as covid 19
