AD

• What is AD?

  the total demand of all goods and services in an economy
• What are the 4 components of AD?

  Consumption, Investment, Government Spending, Net exports
• What is it called when imports > exports?

  trade deficit
• What is Consumption?

  Consumer spending on goods and services over a period of time
• What affects Consumption?

  Taxes, consumer confidence, wealth effect, interest rates.
• What is Government Spending?

  Tax revenues spent on public goods and services
• What affects Government Spending?

  Tax revenue, budget deficit
• What is investment?

  Spending on capital goods
• What are capital goods?

  Goods that are used to produce other goods and services
• What affects investment?

  Business confidence, taxes, interest rates, demand
• What are exports?

  Goods or services sold to foreign countries
• What affects exports?

  Exchange rates, competitiveness, FDI
• What are imports?

  Goods or services bought from a foreign country into another country
• What affects imports?

  Exchange rates, trade barriers
• What is the wealth effect?

  The idea that consumers spend more money when the value of investment increases
• What are visible products?

  Physically tangible goods
• What are invisible products?

  Intangible services
• What are Animal spirits?

  The idea that people follow the thoughts or actions of others
• What are the axis on the AD curve?

  Price level and RGDP