Characteristics of AD

Question 1

Aggregate Demand def.

Answer 1

The total of PLANNED expenditure on domestically produced goods or services in a given time period

Question 2

Aggregate Demand Formula

Answer 2

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

C = Consumption
I = Investment
G = Government spending
X = Exports
M = Imports

Question 3

Consumption

Answer 3

Spending by consumers on G&S that satisfy wants

In the UK, consumption makes 65% of GDP, compared to only 40% in China

Question 4

Investment

Answer 4

Spending on capital goods (Machinery, buildings, roads etc.) and working capital (stocks of finished and unfinished goods that will eventually be sold)

Only 15-2-% of AD in the UK, compared to 4-% in China. Partly explains why China has such high growth

Question 5

Government Spending

Answer 5

Spending on public services etc. but does not include spending on Buildings, machinery etc. THAT IS PART OF INVESTMENT

Includes things such as wages, cost of medicine etc.

Question 6

AD diagram U

Answer 6

U