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Economics Revision

Aggregate Demand:
Total demand for a country's good and services at a given price level and in a given time period.

Components:
1. Consumer expenditure (C)
2. Investment (I) ­ spending on capital goods
3. Government spending (G) ­ on goods and
services
4. Net exports (XM)

Trade…

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Exchange rates
Income levels at home and abroad
Price and Quality of domestic and foreign products

Aggregate demand curve:

Shifts in AD:
Government
spending
Consumption
Net exports
Investment
Interest rates














Aggregate Supply: the total output that producers in the economy are willing and able to
supply at each price level…

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Shifts in LRAS:
Size of labour force
Productive capacity
Economic growth
New resources
Education and training
Healthcare
Taxation
Investment

2. LRAS












Circular flow of income: the movement of spending and income throughout the economy
















*Injections: additions of extra spending into circular flow of income
* Leakages: withdrawals of possible spending…

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