Topic 3 - Aggregate Demand

Question 1

Aggregate demand

Answer 1

The total expenditure on goods and services produced in an economy during a period of time

Question 2

Equation for AD

Answer 2

Consumption + Investment + govt spending + export - import

Question 3

Consumption

Answer 3

The total expenditure of households on goods and services

Question 4

Disposable income

Answer 4

The income that households have to devote to consumption and saving, taking into account payments of direct taxes and transfer payments

Question 5

Consumption function

Answer 5

Shows the relationship between consumption and disposable income ; its position depends on the other factors that affect how much households consume

Question 6

Investment

Answer 6

Spending on capital goods by firms

Question 7

Aggregate demand curve

Answer 7

Shows the relationship between the level of aggregate demand and the average price level - it shows total expenditure at any given average price level