2 - AD - G And (X-M)

Question 1

Role of gov spending

Answer 1

• used to change level of AD
• provide public and merit goods
• correct market failures
• greater equality

Question 2

What happens to gov spending during a downturn/recession?

Answer 2

Spending on welfare and support for the businesses increases
- this is cyclical gov spending during a

Question 3

Factors that influence net trade

Answer 3

• real income
• exchange rate
• state of global economy
• degree of protectionism (tariffs)
• non-price competitiveness
• price competitiveness