Total demand for goods and services produced in an economy at a given price level and in a given time period.
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Components of AD
Consumption (C), investment (I), government spending (G) , exports (X) and imports (M).
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Why the AD curve slopes downwards.
Price level rises so consumers are less able to buy what they want (Falling real income), higher price levels make higher interest rates in order to control inflation (Interest rate effect).
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Factors affecting AD
Any change in the components of AD will cause a change in AD in any direction.
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Directional change in AD
An increase in AD will shift the AD curve out whereas a decrease in AD will shift in inwards.
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Other cards in this set
Card 2
Front
Components of AD
Back
Consumption (C), investment (I), government spending (G) , exports (X) and imports (M).
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