Aggregate Demand (Basic)

Contraction, extension, Price level, Real GDP, Demand, Goods and services, depreciation, gross/net investment, consumption, investment, gov spending, taxes, imports, exports, savings

Describe the AD graph, draw it

A downward sloping line, with Price Level on the Y-axis and Real GDP on the X-axis

Define Aggregate Demand

The overall demand for goods and services in an economy

Define aggregate

Added up

How do you calculate AD?

C + I + G + (X - M)

What is PL and R’GDP?

Price Level= average price level for all goods and services in an economy

Real GDP= overall production of goods in an economy

What is Real GDP also known as?

National Output

How to find the % of component in AD formula

% = (Component/Total AD) x 100

Average UK AD component percentages

C= 60%

I= 14%

G= 25%

X-M= 1%

What happens when PL increases?

Contaction in AD, RDP decreases

What happens when PL decreases?

Extension in AD, RDP increases

Whats the difference between Gross and Net investment?

Gross= overall investment without deductions

Net= total investment after deductions

How to find Net investment?

Net= Gross - Deductions (depreciation)

Define depreciation

The gradual decrease in the value of a physical asset over time, typically due to wear and tear, age, or being outdated (even if it still works perfectly)