Aggregate Demand
- Created by: OhKThenAqsa
- Created on: 19-02-14 19:04
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- Aggregate Demand
- AD = C + G + I (X-M)
- Aggregate means ‘total’ and in this case we use the term to measure how much is being spent by all consumers, businesses, the government and people and firms overseas.
- Changes in expectations
- Confidence falls > Saving increases > Demand falls
- (Monetary policy) Changes in interest rates > Lowers cost of borrowing > More consumption > AD rises
- Changes in interest rates > Investment raises > AD rises
- (Changes in fiscal policy) Increased government spending > Increased AD
- (Fiscal policy) Increased income tax rates > increases disposable income > increased consumption > AD rises
- Depreciation in the pound > imports dearer > exports cheaper > net result should be thatthe AD rises
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