AD And Shifts

Question 1

What is the definition of AD

Answer 1

The total demand for a countries goods and services at a given price level in a given time period

Question 2

What is the AD formula

Answer 2

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

Question 3

What direct is the AD curve

Answer 3

Downward sloping

Question 4

What is the wealth effect

Answer 4

As price decreases, the purchasing power of income will increase, meaning they are more likely to spend on goods and services in the economy. Increasing consumption

Question 5

What is the trade effect

Answer 5

As the price decreases, exports become more competitive, while imports become less competitive. This leads to greater exports and less imports.

Question 6

What is the interest effect

Answer 6

As the price level decreases, interest rates can be kept lower. Meeting the inflation target. Stimulate consumption, investment and reduces the value of the exchange rate leading to greater exports

Question 7

When does AD shift

Answer 7

When C, I, G or (X-M) change independent of the price level