AD and AS

• What does "aggregate" mean?

  The sum or total
• What is aggregate demand?

  Total spending in the economy at a price
• What is the formula for aggregate demand?

  C+I+G+(X-M)
• In the AD formula, what does 'C' stand for?

  Consumption
• In the AD formula, what does 'I' stand for?

  Investment
• In the AD formula, what does 'G' stand for?

  Government spending
• In the AD formula, what does 'X' stand for?

  Exports
• In the AD formula, what does 'M' stand for?

  Imports
• What percentage of AD does consumption make up?

  65%
• What does consumption refer to in the context of aggregate demand?

  Household spending on goods and services
• What does investment refer to in the context of aggregate demand?

  Firms spending on new capital goods
• What does investment add to a country?

  Capital stock
• Approximately what percentage of AD does investment make up?

  17%
• Which types of bodies undertake government spending?

  Local and central government
• Approximately what percentage of AD does government spending make up?

  20%
• What do exports represent in aggregate demand?

  Spending by foreign residents on UK goods
• Approximately what percentage of AD do exports make up?

  31%
• What do imports represent in aggregate demand?

  Spending by UK residents on foreign goods
• Approximately what percentage of AD do imports make up?

  34%
• What is the UK's current trade balance?

  A 3% deficit
• What are net exports?

  The difference between exports and imports
• What is the income effect on the AD curve?

  Households on fixed incomes buy fewer goods
• What is the real balance effect on the AD curve?

  Rising prices reduce the value of savings
• How does international competitiveness affect the AD curve?

  High UK prices make exports less competitive
• How do high interest rates affect the AD curve?

  Reduce investment, borrowing, and consumption
• What causes a movement along the AD curve?

  A change in the price level
• Which of the following causes a shift in the AD curve?

  Change in real incomes and employment
• Which of the following government decisions causes a shift in the AD curve?

  Changes in government taxation
• What is the impact of changes in monetary policy on the AD curve?

  It causes a shift
• What is the impact of changes in the external value of currency on the AD curve?

  It causes a shift
• What effect does increased AD have on the AD curve?

  Shift to the right
• What effect does decreased AD have on the AD curve?

  Shift to the left
• What causes a shift in the aggregate supply curve?

  Change in production costs
• What impact does a rise in production costs have on the aggregate supply curve?

  It shifts left
• What impact does a fall in production costs have on the aggregate supply curve?

  It shifts right
• Which of the following is a production cost?

  Labour costs
• Which of the following is a production cost?

  Energy costs
• Which of the following is a production cost?

  Components
• Which of the following is a production cost?

  Business taxes (VAT)
• What happens in the long run when the aggregate supply curve shifts?

  Price level stays the same but output increases