2.2 Aggregate Demand 0.0 / 5 ? EconomicsAggregate DemandASEdexcel Created by: tomstodd23Created on: 12-01-18 09:46 Aggregate Demand The total demand for goods and services in an economy at a given time and price level. 1 of 18 Aggregate Demand Formula AD= Consumption (C) + Investment (I) + Government Spending (GS) + Exports - Imports (X-M). 2 of 18 What way does the Aggregate Demand curve slope and why? Downwards from left to right, because of the wealth effect, the interest rate effect and the international trade effect. 3 of 18 Changes in consumer spending arise from what? Consumer Confidence, Household Indebtedness, Expectations, Wealth, Income. 4 of 18 Influences on the level of investment Business confidence, Interest rates, Changes in technology, Changes in business taxes. 5 of 18 The Wealth Effect Where people spend depending on the value of their assets. 6 of 18 Interest Rate The cost of buying money. 7 of 18 Consumer Confidence Index (CCI) Measures how optimistic consumers are with respect to the economy in the near future. 8 of 18 Durable Goods Provides a flow of services to the consumer over a number of years, e.g. a boiler. 9 of 18 Non-Durable Goods Used up at the point of consumption. 10 of 18 Average Propensity to Consume (APC) Measures the average amount spent on consumption out of total disposable income. Consumption/Income. 11 of 18 Average Propensity to Save (APS) Measures the average amount of disposable income that is saved. Saving/Income. 12 of 18 Marginal Propensity to Consume (MPC) Measurement of how much consumption will rise in response to a change in income. Change in consumption/ Change in Income. 13 of 18 Marginal Propensity to Save (MPS) Measurement of how much additional income is saved. Change in saving/Change in income. 14 of 18 Influences on imports and exports Real income, Relative prices, Exchange rates, The state of the world economy, non-price factors such as natural disasters. 15 of 18 Deficit When Government spending is greater than Government receipts. 16 of 18 Surplus When Government spending is less than Government receipts. 17 of 18 Fiscal Policy This involves the Government intervening with the economy by methods such as taxation, spending and borrowing to further the economy. 18 of 18
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