MACRO - AD+AS

Question 1

what is the accelerator effect?

Answer 1

when a change in economic growth leads to a more than proportional change in investment

Question 2

what is the wealth effect?

Answer 2

as the price level decreases purchasing power increases making people relatively richer

Question 3

what is the interest effect?

Answer 3

interest rates may be low in order to match inflation targets

Question 4

what is the trade effect?

Answer 4

exports become more competitive as a result of a high demand increasing the revenue gained from them and imports become less competitive and there is less spending on them.
X increases + M decreases = AD increases

Question 5

what is transfer spending?

Answer 5

spending on welfare

Question 6

what is current spending?

Answer 6

day to day running of public services

Question 7

what is capital spending?

Answer 7

spending on infastructure

Question 8

what is the current national debt?

Answer 8

1.8 trillion / 85.2% of GDP

Question 9

what causes a SHIT in LRAS?

Answer 9

• supply side shock

a firms cost

Question 10

what causes effects the level of LRAS?

Answer 10

quantity/quality of factors of production

Question 11

what causes a SHIFT in SRAS?

Answer 11

cost of production

Question 12

what causes a MOVEMENT in SRAS?

Answer 12

change in the price level

Question 13

what causes a MOVEMENT in AD?

Answer 13

change in the price level

Question 14

what causes a SHIFT in AD?

Answer 14

changes to components of AD

Question 15

what are the determinants of consumption?

Answer 15

availability of Credit
consumer Income
changes to income Tax
Wealth
consumer Confidence 
Interest rates

Question 16

what are the determinants of investment?

Answer 16

consumer Spending
business Profit
availability of Loans 
Interest rates
Subsidies 
changes to Cooperation tax

Question 17

what are the sources of government expenditure?

Answer 17

tax

loans