Determinants Of AD (Govt Spending) Flashcards
1
Q
Foreign incomes in Govt spending
A
If rises then increase in demand for exports
Net exports increased
2
Q
Domestic incomes in Govt spending
A
If rises then increase demand for imports
Net exports falls
3
Q
Exchange rate in Govt spending
A
If domestic currency appreciates exports become less price competitive and imports become more price competitive
Net exports will fall
4
Q
Relative inflation in Govt spending
A
If domestic inflation is higher than inflation abroad domestic goods become less price competitive
Net exports will decrease
5
Q
Inflation
A
Sustained increase in the price level
6
Q
Exchange rate
A
The amount of domestic currency needed to buy a given amount of foreign currency
