2.2.1: The characteristics of Aggregate Demand Flashcards
1
Q
What is aggregate demand?
A
Aggregate demand is the total demand for all finished goods and services produced in an economy.
2
Q
What are the components of AD?
A
- Consumption (C)
- Investment (I)
-Government Spending (G) - Net exports (X-M)
3
Q
What is the sum for AD?
A
AD= C + I + G + (X-M)
4
Q
What is consumption?
A
Consumption is consumer spending on goods and services
5
Q
What is investment?
A
Investment is spending by businesses on capital goods, such as new infrastructure as well as working capital eg stocks
6
Q
What are net exports?
A
Net exports are exports minus imports
7
Q
What causes movements along the AD curve?
A
Changes in prices, caused by inflation or deflation
8
Q
What causes a shift on the AD curve?
A
- Change in the components of AD
