Aggregate Demand

Question 1

What’s disposable income

Answer 1

The money after paying your mortgage, still have to pay bills.

Question 2

What’s discretionary income

Answer 2

Money after paying bills

Question 3

The determinants of consumption

Answer 3

Disposable income
Inflation
Interest rates
Wealth

Question 4

MPC=

Answer 4

Marginal propensity to consume

Propensity to consume

Question 5

MPS=

Answer 5

Marginal propensity to save

Propensity to save

Question 6

What’s investment

Answer 6

Companies investing in machinery

Question 7

Determinants of investments

Answer 7

Interest rates
Price
Business confidence 
Rate of change in technology
Minimum wage
Lifetime
Retain profit

Question 8

If a lower interest rates how will it affect investments?

Answer 8

Invest more as loans cost less

Question 9

Multiplier effect

Answer 9

An initial increase in spending leads to a greater increase in output

Question 10

What happens to investment in recession?

Answer 10

Lack of confidence
Less investment profits fall
No money won’t be lent out

Question 11

What government spending is there?

Answer 11

Public services e.g education, health and defence
Merit goods
Services
Benefits

Question 12

If the government spends more than it receives…

If it spends less..

Answer 12

Deficit

Surplus

Question 13

Effects on imports and exports

Answer 13

Inflation
Taxation
Currency rate

Question 14

AD=

Answer 14

C+I+G+(X-M)