Aggregate demand Flashcards
What makes up AD
65% consumers
15% investments
25% government
-5% (imports - exports)
How we measure how well the economy is
- Intrest rates
- GDP
- Unemployment
- Inflation
Aggregate demand
Total planned real expenditure on a country’s goods and services produced within an economy in each time period
Consumption
What people buy on a daily basis
Disposable income
Gross pay - Tax/Insurance
Discretionary income
Disposable income - Bills
MPC
Marginal propensity to consume
What is MPC
Amount of additional income we can spend
How to work out MPC
Change in cost / Change in income
MPS
Marginal propensity to save
What is MPS
Amount of additional income we can save
How to work out MPS
1 - MPC
Wealth income
As wealth increases, spending increases
Availability of credit
The more you can borrow, the more you can spend
Rate of interest
The more paid back, the less consumption (Higher intrest = More saving)
