Shifts in AD curve (G) (X-M)

Question 1

Gov expenditure

Answer 1

• expenditure on goods and services, transfer payments
• transfer payments not included in component of AD
• fiscal policy: gov adjust spending lvls and taxes to monitor and influence economy
• gov increase and decrease expenditures in response to changes in political priorities

Question 2

Gov expenditure (Recession)

Answer 2

• gov increase expenditure on domestically produced goods and services
• NY increase, boost economy
• AD increase, shift to right

Question 3

Net exports

Answer 3

• diff between total export revenue and total import expenditure
• lvl of exports and imports affected by changes in exchange rates, relative income lvl, gov trade policies (tariffs, quotas)

Question 4

Example of net exports

Answer 4

• country X trading partners experience economic growth
• buy more imports frm country X
• X export revenue increase
• (X-M) increase, AD increase ceteris paribus