Aggregate Demand

• What is Aggregate Demand?


  • Total spending within the economy by households, firms and governments on G+S at a given price level
  • C+I+G+(X-M)
  • AD increase = Economic Growth
• What is consumption?


  • Total spending by individuals on G+S
• What is Investment?

  • Total spending by firms on capital goods (machinery, plant)
• What is Government Spending?


  • Total spending by the government on public G+S
• Imports


  • Its the G+S produced abroad but sold domestically
• Exports


  • It's G+S produced domestically but sold abroad
• Why the AD curve slopes down

  • Wealth effect
  • Trade effect
  • Interest rate effect
• What is Net Trade?


  • The difference between imports and exports (X-M)
• What is Ceteris Paribus?


  • All else remains equal
• What is Consumption?


  • Household / Individual Spending
• What is Budget Surplus?


  • More government receipts than spending
• What is Budget Deficit?


  • More government spending than receipts
• What is Government Spending?


  • Spending on the public sector
• What is Investment?


  • Firm spending on capital goods