2.2.1 Characteristics of AD

Question 1

What are the components of AD?

Answer 1

• consumption
• investment
• government spending
• exports
• imports

Question 2

What is the acronym for AD?

Answer 2

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

Question 3

What is consumption?

Answer 3

The total planned household spending

Question 4

What is investment?

Answer 4

The spending on capital goods

Question 5

What is government spending?

Answer 5

Spending by the government

Question 6

What percentage of AD is consumption?

Answer 6

66%

Question 7

What percentage of AD is investment?

Answer 7

17%

Question 8

What percentage of AD is government spending?

Answer 8

18.6%

Question 9

What percentage of AD is exports?

Answer 9

28.5%

Question 10

What percentage of AD is imports?

Answer 10

-30.3%

Question 11

What causes a movement along the AD curve?

Answer 11

A change in the price level

Question 12

What causes a shift left in the AD curve?

Answer 12

• stronger currency
• cut in government spending
• high interest rates
• decline in household wealth

Question 13

How does a stronger currency shift the AD curve to the left?

Answer 13

A strong currency leads to more goods being imported as they are cheaper, greater imports leads to a fall in AD

Question 14

What causes a shift to the right in the AD curve?

Answer 14

• weaker currency
• cuts in direct and indirect taxes
• increase in house prices
• low interest rates

Question 15

What is the aggregate demand curve?

Answer 15

The relationship between the level of aggregate demand and the overall the price level

Question 16

What is aggregate demand?

Answer 16

The planned household spending on goods and services at any given price within the economy