Yr 11 ATAR Economics Unit 2

Components of Aggregate Expenditure

Consumer spending, business investment, government spending, net exports.

Aggregate Expenditure - Consumer Spending

Spending by households on goods and services examples include food, clothing, transport, appliances, entertainment, health and education services.

Aggregate Expenditure - Business Investment

Spending by firms on capital goods used to produce goods and services, examples include machinery, equipment, factories, warehouses, research and development, inventories.

Aggregate Expenditure - Government Spending

Spending by commonwealth, state and local governments on goods, services and infrastructure, examples include schools, hospitals, roads, defence, public sector wages.

Aggregate Expenditure- Net Exports

Include exports and imports, exports is spending by overseas buyers on Australian goods and services, imports is spending by Australians on overseas goods and services.

Factors affecting consumer expenditure

Disposable income, household wealth, interest rates, household confidence and expectations

Disposable income - meaning

The income households have available to spend or save after income tax, plus any transfer payments they receive

Household Wealth - meaning

The value of assets owned by households, such as housing, savings, shares and superannuation, minus debts.

Interest rates - meaning

The cost of borrowing money and the reward for saving money.

Household confidence and expectations - meaning

Confidence refers to how positive households feel about the future, including job security, income and economic conditions