AD

Question 1

what is AD

Answer 1

total planned spending on real output in an economy - C + I + G + (X-M)

Question 2

determinants of consumption

Answer 2

• interest rates (reward for saving and cost of borrowing)
• income
• expected future income
• confidence

Question 3

accelerator process

Answer 3

• changes in investment can be linked to changes in rate of GDP growth
• if output grows by constant rate firms invest in more capital

Question 4

Multiplier

Answer 4

• relationship between change in AD & change in national income (AD will keep rising)
• 1/1-MPC

Question 5

marginal propensity to consume

Answer 5

• willingness of households to spend any extra income they earn
• change in consumption / change in income