theme 2 chapter 2 Flashcards
what is aggregate demand
total expenditure on all goods and services at any given price level
what is the formula for AD
AD = C+I+G+(X-M)
what is consumption
total UK household expenditure
what are the 4 factors that effect consumption
- changes in income
- change in interest rates
- consumer confidence
- wealth effects
what is the difference between gross and net investment
gross - amount firm invests in business assets without depreciations
net - actual value of investment after depreciations
what is investment
where firms purchase capital goods
what are the 7 factors that influence investment
- rate of economic growth
- business confidence
- demand for exports
- interest rates
- access to credit
- government regulations
- animal spirits
what is government spending
total amount spent by government on public services
what are 4 factors that influence government spending
- the budget
- trade cycle
- external shocks
- technological changes
what is net trade
the value of exports minus imports
what are the 6 factors that effect net trade
- exchange rates
- real incomes
- trade barriers
- state of world economy
- non-price factors
- interest rates
what does a change in price lead to on a AD diagram
movement along AD curve
