4.4 Macroeconomic Policies And Impact On Firms And Individuals

Question 1

Aggregate demand

Answer 1

Total demand for a country’s goods and services at a given level at a given time period

Question 2

AD formula

Answer 2

AD = consumer spending + investment spending + gov spending + (exports - imports)

Question 3

Why is AD curve downward sloping

Answer 3

• wealth effect
• trade effect
• interest effect

Question 4

Wealth effect

Answer 4

• people richer - moneys go further due to decreased prices - more likely to spend on goods and services
• increases ‘C’ in AD eq. Increase in real GDP from Y1 to Y2