2.2.1 Characterisitics Of AD

Question 1

Aggregate demand

Answer 1

The total demand in an economy
Measures spending on goods and services by consumers, firms and government and overseas consumers and firms
Made up of :
C+I+G/(X-M)

Question 2

Consumer spending

Answer 2

How much consumers spend on goods and services

Question 3

Investment

Answer 3

This is business spending on capital goods
Accounts for around 15-20% of GDP
In the uk per annum

Question 4

Government spending

Answer 4

How much the government spends on state goods and services such as schools and NHS

Question 5

Exports minus imports

Answer 5

This is the value of the current account on the balance of payments

Question 6

C+I+G+(X-M)

Answer 6

consumer spending
Investment
Government spending
Exports minus imports

Question 7

Downward slope of AD explained by:

Answer 7

• higher prices lead to a fall in the value of real incomes, so goods and services become less affordable in real terms
• if there was high inflation in the UK