Characteristics of aggregate demand

• What is aggregate demand (AD) ?

  The total amount of planned spending on goods and services at a given price level in an economy in a year
• What is the formula for aggregate demand?

  C + I + G + (X-M)
• How much does consumption account for in relation to the UK economy?

  60%
• How much does investment account for in relation to the UK economy?

  15%, but this can change according to the state of the economy
• How much does government spending account for in relation to the UK economy?

  25%, but this can change according to the state of the economy
• What does an AD curve show?

  It shows as general price level falls, real output will increase
• What causes a movement along an AD curve?

  A change in the price level, so when any on of the components of the formula C + I + G + (X-M) change
• What would a shift right of the AD curve represent?

  An increase in aggregate demand, and that it is higher at each price level
• What would a shift left of the AD curve represent?

  A decrease in aggregate demand, and that it is lower at each price level
• Why is the AD curve downward sloping?

  Beacuse as the price level increases, the purchasing power decreases, which leads to a decrease in demand for real output