Aggregate Demand

Question 1

Definition of Aggregate Demand

Answer 1

This is the total spending on goods and services

Question 2

What is the AD equation

Answer 2

C + I + G + (X - M)

Question 3

Factors causing an increase in AD

Answer 3

• Increased Consumption
• Increased Investment
• Increased Government Spending
• Increased Exports
• Decrease Imports

Question 4

Increased Consumption

Answer 4

• An increase in consumers wealth, which gives them more confidence to spend
• Lower interest rates, this makes borrowing cheaper and encourages people to spend.
• Higher wages, which increases disposable income.
• Lower taxes

Question 5

Increased Government Spending

Answer 5

This is the spending on education and transports. The spending on state.

Question 6

Increased Investment

Answer 6

This is the spending on fixed capital like machines. This could increase due to:
• Lower interest rates
• Increase confidence
• Improved technology 
• Increased economic growth

Question 7

Increased exports

Answer 7

• Increased growth in other countries

* Depreciation of the currency, makes exporting cheaper.