Factors affecting AD

Question 1

Consumption (C)

Answer 1

• interest rates
• stage of economic cycle
• income tax rates
• increase in c causes increase in m
• consumer confidence
• inflation expectations

Question 2

Investment (I)

Answer 2

• stage of economic cycle
• level of spare capacity in the economy
• business confidence
• consumer confidence
• profit levels
• interest rates

Question 3

Government spending (G)

Answer 3

• stage of economic cycle
• size of public sector
• tax revenue
• employment levels
• govt commitments

Question 4

Exports (X)

Answer 4

• our international competitiveness
• stage of economic cycle overseas
• tariffs overseas
• exchange rate

Question 5

Imports (M)

Answer 5

• stage of economic cycle
• exchange rate
• our international competitiveness
• tariffs