Unit 3.2 - Variations in economic activity: aggregate demand and aggregate supply

Question 1

Aggregate demand (AD)

Answer 1

The total spending in an economy. It consists of consumer expenditure (C), investment expenditure (I), government spending (G) and net exports (X-M)

Question 2

Aggregate demand curve

Answer 2

A graph that shows the relationship between average price levels and real GDP

Question 3

Equation for AD

Answer 3

AD = C + I + G + (X - M)

Question 4

Consumer expenditure

Answer 4

Spending by households on consumer goods/services over a period of time

Question 5

Government spending

Answer 5

Spending by the government on goods/services

Question 6

Investment expenditure

Answer 6

1. Addition to capital stock to the economy
2. Expenditure by firms on buying capital

Question 7

Net exports

Answer 7

Export revenue minus import expenditure