Macroeconomics

Question 1

Aggregate Demand

Answer 1

Consumption (C) + Investment (I) + Government Spending (G) + Net Trade/Exports-Imports (X-M).

the total demand for goods and services within a particular market.

Question 2

Aggregate Demand 1

Answer 2

The AD curve is downward sloping.

Consumption will fall as the price level rises - a movement (not a shift) along the AD curve.

Question 3

Components of Aggregate Demand

Answer 3

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

C is consumption
I  is Investments 
G is government spending 
X is Exports 
M is Imports

Question 4

Consumption

Answer 4

Factors affecting levels of consumption:

Wealth levels 
Income levels 
Future expectations of inflation
Consumer confidence
Unemployment levels 
Job security

Question 5

Investment(intro)

Answer 5

Defined as expenditure that increases the capital stock of a country.
Physical capital_would be expenditure by firms on machinery.
Human Capital_ is expenditure by firms on the skills of its workers. eg.training programs.

Question 6

Investment

Answer 6

Factors affecting levels of investment:

Intrest rates.
Future growth and demand.
Profitability 
Government policies eg. corporate tax, subsidies
Efficiency of financial systems.

Question 7

Government spending (intro)

Answer 7

Current spending_ is transfer such payments as benefits or welfare payouts and running government eg. salaries, utility bills.

Capital spending_Long term spending such infrastructure( increases the productive spending) or Government debt.

Question 8

Government spending

Answer 8

Cost of borrowing 
Fiscal deficit or debt targets
Levels of nations debt.
State of the economy.
Confidence in the economy.
Political bias.

Question 9

Exports and Imports

Answer 9

Exchange rate_Determines the relative prices of imports and exports.
Quality of goods_affects international competitiveness.
Inflation rates_ affects domestic and international prices.
Relative levels of Income_high domestic income-high marginal propensity to import.
Spare Capacity _to supply resources.