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Macro economics notes

Aggregate demand: is the total demand for a country's goods and services at a given price
level in a given time period.
AD= C+I+G+(XM)
Components of AD
Consumer expenditure (consumption) is one of the largest components of AD, it is
the spending of a household, on items…

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Net exports add foreigners spending on the country's goods and services deducted
by the populations imports. This component can be positive or negative to a country
If a country has a surplus in trade then the exports with will be greater then the imports then
adding net exports to C+I+G…

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The multiplier effect ­ when injection exceeds leakages aggregate demand will increase.
The process by which any change in a component of AD results in a greater final change in
real GDP.

When injections exceed leakages ad will increase the rise in ad will have a greater final effect
on…

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Causes of economic growth
Short run ­ an economy can experience with spare capacity as a result in an
increase in AD, eg fall in exchange rates could increase net exports, consumption
lead growth, a cut in income or a decrease in interest rates or government
intervention
Net invest ­…

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collects a large range of information on the labour force eg, how much the earn what
type of job ect
There is also the claimant count which measure unemployment biased on how many
people are claiming on job seekers allowance, and is a monthly count and people
sighed up to…

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Can reduce demand pull and cost push inflation.
The significance of unemployment
it depends on how much unemployment there is, how long they are unemployed for, the
benefits on offer to the unemployed the type of unemployment and the distribution

the higher the rate the more significant it is, if…

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There are two different types of inflation demand pull and cost push
Demand pull ­ arises when AD increases at a faster rate then AS especially if the firm is
producing at near full capacity then it is likely a rise in demand will increase prices.
Cost push inflation ­this…

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Deflation it is possible for a country to consider deflation, stats tend to overstate inflation,
so may mask deflation. From a supplyside this may be a positive as it may mean a cut in the
price of raw materials.
Or it may be caused by a fall in AD which…

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this depends on the size and the duration of the deficit to how significant it is, it can indicate a
growing and healthy economy with high living standards, and in the short term it may just be
the import of raw materials to then increase production of final products.
A…

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The key aim is to influence AD either by increasing to increase spending decrease tax

Fiscal policy the taxation and spending of a government
It can be reflationary(increasing AD) or deflationary (decreasing AD)
Changes in tax may be used for other reasons such as trying to increase the consumption of…

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