AD

Question 1

What are the main components of AD?

Answer 1

C+I+G+(X-M)

Question 2

How are the components of AD divided?

Answer 2

Consumption 60%
Investment 15-20%
Government spending 18-20%
Exports/Imports 5%

Question 3

What influences consumer spending?

Answer 3

Interest rates, consumer confidence , wealth effects, disposable income

Question 4

What causes a shift in AD?

Answer 4

(Any component of AD formula)

Question 5

What causes a movement along the AD curve?

Answer 5

A change in the general price level

Question 6

What is gross investment?

Answer 6

Gross investment is the total amount that the economy spends on new capita. E.g machinery

Question 7

What is net investment?

Answer 7

Net investment = gross investment – capital depreciation.

Question 8

What are the influences on investment?

Answer 8

The rate of economic growth , business confidence , ‘Animal spirits’, demand for exports , , interest rates, the influence of government , access to credit

Question 9

What is the wealth effect

Answer 9

a behavioral economic theory suggesting that people spend more as the value of their assets rise