Aggregate demand

Question 1

Aggregate demand

Answer 1

A measure of spending

The total demand for a country’s goods and services at a given price level in a given time period

Question 2

AD =

Answer 2

C+ I+ G +(X-M)
Aggregate = consumption + investment government spending +( exports - imports)

Question 3

Real GDP

Answer 3

Where inflation is taken into account

Stands for Gross Domestic Product

Refers to the total value of all goods and services produced in the economy.

Includes the value of everything that is spent, earned, produced

Question 4

output method

Answer 4

The value of all goods and services that are produced in the economy

Economist avoid ‘double counting’ and subtract the value of raw materials in all finished products

Question 5

Income method

Answer 5

The value of all the income that is earned from the factors of production in the economy

Economists subtract benefit payments because they are not generated through FOP

Question 6

Consumption

Answer 6

consumer spending on goods and services; it makes up about 60% of AD, so is the biggest part.

Question 7

investment

Answer 7

spending by businesses on capital goods, such as new equipment and buildings as well as working capita

Question 8

Government spending

Answer 8

spending by the government on providing goods and services, generally public and merit goods, both on wages and salaries of public sector workers and on investment goods like new roads and schools.

Question 9

Net exports

Answer 9

exports minus imports: when imports are higher than exports this is a minus figure as more money leaves the UK than comes in. The UK has a large trade deficit, but this minor figure and is the least significant part of AD at around 5%.

Question 10

budget deficit is

Answer 10

when government spending exceeds tax revenue