AD Flashcards

1
Q

What are the main components of AD?

A

C+I+G+(X-M)

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2
Q

How are the components of AD divided?

A

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

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3
Q

What influences consumer spending?

A

Interest rates, consumer confidence , wealth effects, disposable income

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4
Q

What causes a shift in AD?

A

(Any component of AD formula)

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5
Q

What causes a movement along the AD curve?

A

A change in the general price level

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6
Q

What is gross investment?

A

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

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7
Q

What is net investment?

A

Net investment = gross investment – capital depreciation.

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8
Q

What are the influences on investment?

A

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

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9
Q

What is the wealth effect

A

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

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10
Q

What are demand side policies?

A

Demand-side policy refers to government actions, such as adjusting taxes, spending, or interest rates, to influence consumer demand and manage economic growth, inflation, and unemployment.

Involves Monetary and Fiscal policy

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