2.2 Aggregate Demand (AD)

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10 Terms

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Aggregate Demand (AD)

Total spending on goods and services in an economy.

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Consumption (C)

Spending by households on goods and services.

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Disposable Income

Income remaining after direct taxes have been paid.

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Investment (I)

Spending by firms on capital goods.

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Government Spending (G)

Expenditure by the government on goods and services.

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Exports (X)

Goods and services sold overseas.

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Imports (M)

Goods and services purchased from overseas.

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Net Exports

Exports minus imports.

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Wealth Effect

When rising asset prices increase consumer spending because households feel wealthier

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Marginal Propensity to Consume (MPC)

The proportion of extra income that is spent.