AD

Question 1

AD=

Answer 1

C + I + G + (X-M)

Question 2

AD

Answer 2

Total amount of planned spending on goods and services at any price level in an economy

Question 3

C

Answer 3

Spending by households on goods and services

Question 4

Main determinants of C (4)

Answer 4

1. Interest rates
2. Consumer confidence
3. Wealth effects
4. Level of employment

Question 5

I

Answer 5

An increase in the capital stock in an economy

Question 6

Main determinants of I (8)

Answer 6

1. Rate of economic growth
2. Confidence levels
3. Interest rates
4. Animal spirits
5. Risk
6. Access to credit
7. Government decisions
8. Government bureaucracy

Question 7

Gross investment

Answer 7

Total amount of investment before any account is taken of depreciation of assets

Question 8

Net investment

Answer 8

Takes into account the fall in value of assets

Question 9

G

Answer 9

Governments choose how much they spend & deliberately manipulate total spending in economy by changing their own level of spending

Question 10

Fiscal or budget deficit

Answer 10

When the government spends more than it earns in a financial year

Question 11

When does the government spend more?

Answer 11

In a recession- more transfer payments and less taxation

Question 12

Net exports

Answer 12

Export of goods and services meaning money is flowing into a country

Question 13

Causes of changes in net exports (5)

Answer 13

1. Real income
2. Change in the exchange rate
3. Changes in the state of the world economy
4. The degree of protectionism
5. Non-price factors e.g. quality of engineering or reliability of after-sales services

Question 14

SPICED

Answer 14

Strong pound, imports cheap, exports dear (expensive)

Question 15

Fiscal policy

Answer 15

Government’s position or set of decisions on government spending, taxation (and borrowing) to achieve macroeconomic objectives