AD

Question 1

Aggregate Demand

Answer 1

Total level of demand in an economy at any given price at a moment in time

Question 2

AD Formula

Answer 2

C+I+G+(X-M)

Question 3

Consumption

Answer 3

How much consumers spend on G+S Largest, component of AD

Question 4

Disposable income

Answer 4

amount of income left over after taxes and social security charges

Question 5

Marginal Propensity to consume

Answer 5

how much spending changes after a change in income

Question 6

Marginal Propensity to save

Answer 6

The proportion of an increase in income that is saved

Question 7

Influences on Consumer Spending

Answer 7

Interest Rates - low interest rates means people don’t want to save so instead they save

Consumer Confidence - higher confidence in the economy means they won’t save as they aren’t worried about future mishaps

Wealth affects - If someone sees their assets increase in price they will see themselves as wealthier so they spend more

Question 8

Investment

Answer 8

Business spending on capital goods

Question 9

Net investment

Answer 9

Actual addition to capital stock of an economy after taking into account depreciations. gross investment - depreciations = net investment

Question 10

Influences on Investment:

Answer 10

Rate of Economic growth - If growth is high firms have more revenue to invest

Animal Spirits - Higher confidence in ROI so they invest more

Demand for exports - If demand is high firms invest more as they expect more sales

Interest rates - If interest rates are low firms will borrow to invest as its cheaper

Access to credit - If banks are unwilling to lend firms will find it harder to find the money to invest

Question 11

Government Spending

Answer 11

How much government spends on state goods

Question 12

Influences on Government expenditure

Answer 12

Trade cycle

Question 13

Trade cycle

Answer 13

Boom, Recession, Slump, Recovery, Boom

Question 14

Boom

Answer 14

Growth is high and fast, Real output rises. Government will not stimulate economy

Question 15

Recession

Answer 15

Real output falls, Negative Growth. Government will stimulate economy

Question 16

Exports minus Imports

Answer 16

Value of current account on balance of payments

Question 17

Influences on net trade balances

Answer 17

Real income - More income more imports(Larger deficit on current account). Less income less imports(Smaller deficit on current account)

Exchange rates - Depreciation of pound means imports are more expensive and exports are cheaper (Deficit decreases on current account since imports decrease)

State of world economy - If world economic state is bad UK’s export decreases

Degree of protectionism - Protectionism guards a countries industries from foreign competitors, in the form of quotas, tariffs and regulation this can decrease imports