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Aggregate Demand
Aggregate Demand (AD) is the total planned expenditure on goods and services produced in the UK.

Why does AD slope down?

As the price level decreases, consumers can buy more goods and services. So real GDP
increases.
As the price level falls, interest rates will fall, so the…

Page 2

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1. Income: An increase in income means consumers can buy more goods and services so C
increases.
2. Tax: An increase in volume tax means consumers have less money to spend so C decreases.
3. Expectations: As consumers' expectations rise, they exert more income in the future so save
less…

Page 3

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1. A reduction in the rate of interest. Interest rates decrease so loans are cheaper, G and I
increases so AD increases and shifts right.
2. A rise in expected profits. Firms expect more profit in the future, so I increases and AD shifts
right.
3. A recession. Incomes are…

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