2.2.1 - The characteristics of AD Flashcards
1
Q
What are the components of AD ?
A
● Consumption- household expenditure.
● Investment - Total spending on capital goods by firms.
● Consumption - Total spending by the government in the economy:
o Includes public sector salaries, payments for provision of merit and public goods etc.
o It does not include transfer payments
● Exports - Imports - the difference between the revenue gained from selling goods/services abroad and the expenditure on goods/services from abroad.
C+I+G+(X-M)
2
Q
Why is the AD curve is downward sloping
A
3
Q
The distinction between a movement along, and a shift of, the AD curve
A
Shift : Caused by a change in the components of AD
Movement: Caused by a chef in the price level
