Studied by 2 peopleAggregate demand
________: total spending on goods and services in a time period at a given price level.
Consumption
________ is the total spending by consumers on domestic goods and services.
real output
AD shows the relationship between average price level and ________.
Business expectations
________: interest rates fall, consumers will have more disposable income.
Formula of aggregate demand
AD = C + I + G + (X-M)
aggregate demand shows
the relationship between average price level and real output
Consumption is
More volatile and least sustainable
Changes in income: as income rises people have to spend more
Changes in interest rate: more incentive to save and consume less (borrowing increases, decrease in consumption)
Investment
firms investing into capital equipment machinery and premises
Investments are
Rate of interest (amount firms pay to borrow money)
Business expectations
interest rates fall, consumers will have more disposable income
Accelerator effect
reaction of investment to the rate of change of income
Monetary policy
Decrease in either AD will fall (growth will fall)
Increase in either AD will increase
Monetary policy
a set of actions to control a nation's overall money supply and achieve economic growth.
Aggregate demand
total spending on goods and services in a time period at a given price level
Expectations
consumers expect prices to rise in the future they will increase their consumption if they expect prices to fall later
Investment
firms investing into capital equipment machinery and premises
Accelerator effect
reaction of investment to the rate of change of income
Note 
Flashcard (38)