Aggregate Demand

Question 1

What is Aggregate?

Answer 1

Sum or total

Question 2

What is Aggregate Demand?

Answer 2

Total of all spending in economy at any given price level

Question 3

How do you work out Aggregate Demand?

Answer 3

AD = C + I + G + (X-M)

Question 4

What does C stand for?

Answer 4

Consumption

Question 5

What is Consumption?

Answer 5

The total expenditure by households on goods and services in the domestic economy over a period of time

Question 6

What does I stand for?

Answer 6

Investment

Question 7

What is Investment?

Answer 7

The addition to the capital stock of the country

SPECIFIC = Capital Investment (machinery, factories)

Question 8

What does G stand for?

Answer 8

Government Spending

Question 9

What is Government Spending?

Answer 9

Spending by central and local government for goods and services eg. providing education

Question 10

What does M stand for?

Answer 10

Imports

Question 11

What are Exports?

Answer 11

Spending by residents of other countries on goods/services in UK

Question 12

What does X stand for?

Answer 12

Exports

Question 13

What are Imports?

Answer 13

Spending by UK residents (households/firms/governments) on goods/services from abroad

Question 14

What does (X-M) stand for?

Answer 14

Net exports

Question 15

What are Net exports?

Answer 15

Difference between money earned by exports and money spent on imports

Question 16

What is the largest component of Aggregate Demand for most countries?

Answer 16

Consumption

Question 17

What does Government Spending not include?

Answer 17

Transfer Payments (giving money in return for nothing) eg. State Pensions, Housing Benefits, Job Seekers Allowance