2.2 Aggregate Demand

Question 1

Gross investment

Answer 1

amount that a firm invests in business assets that does not account for depreciations

Question 2

depreciation

Answer 2

depreciation is when something starts to lose value

Question 3

Net investment

Answer 3

depreciations have been considered

Question 4

rate of economic growth influence on investment

Answer 4

Growth higher = more consumer spending = more revenue = more profits available to invest

Question 5

Business expectations and confidence influence on investment

Answer 5

expect a high rate of return, they will invest more

Question 6

Demand for exports influence on investment

Answer 6

higher demand is, the more likely it is that firms will invest. This is because they expect higher sale

Question 7

Interest rate influence on investment

Answer 7

Investment increases as interest rates falls. This means that the cost of borrowing is less and the return to lending is higher

Question 8

Real disposable income earned abroad effect on net income

Answer 8

Higher income in other countries =demand exports increase

Question 9

Real disposable income earned at home effect on net income

Answer 9

Boom in income at home = imports increase

Question 10

SPICED

Answer 10

Strong currency - imports cheaper - exports dear

Question 11

WIDEC

Answer 11

Weak - imports dear - exports cheaper

Question 12

Tarrafis at abroad affect on net income.

Answer 12

Tarrifs = decrease in exports

Question 13

Inflation levels at home effect in net income

Answer 13

High inflation - exports decrease