Aggregate Demand
Consumption
Investment
Gov Expenditure
Net Trade
100
Consumers and firms have higher confidence levels, so they invest and spend more, because they feel as though they will get a higher return on them. This is affected by anticipated income and inflation. (AD graph)
What causes AD to shift to the right?
100
The proportion of each additional pound of household income that is used for saving.
What is marginal propensity to save?
100
This is the actual addition to the capital stock of an economy, after depreciations have been considered
What is net investment?
100
Real output increases when there are periods of economic growth
What is the recovery stage?
100
During periods of economic growth, when consumers have higher incomes and they can afford to consume more
What is REAL INCOME?
200
Higher taxes mean consumers have less disposable income. (AD graph)
What causes AD to shift to the left?
200
The amount of income consumers have left over after taxes and social security charges have been removed. It is what consumers can choose to spend.
What is Disposable income?
200
when a capital good starts to lose value
What is depreciation?
200
When economic growth is fast, and it could be inflationary or unsustainable
What is the boom stage?
200
A depreciation of the pound. (means imports are more expensive, and exports are cheaper)
What causes the current account trade deficit to decrease?
300
C + I + G +(X-M)
What are the components of AD?
300
A lot of people own their houses. This means that after a rise in the price of houses people are likely to spend more.
What is the wealth effect?
300
- The rate of economic growth - Business expectations and confidence - Demand for exports - Interest rates - Access to credit
What are the influences on investment?
300
It involves changing government spending and taxation.
What is Fiscal Policy?
300
the act of guarding a country’s industries from foreign competition. It can take the form of tariffs, quotas, regulation or embargoes.
What is protectionism?
400
- A fall in the price level from P1 to P2 - A rise in the price level from P2 to P1
What causes a movement along the demand curve?
400
People invest and spend more because they feel as though they will get a higher return in the future. This is affected by anticipated income and inflation.
What is consumer confidence?
400
During periods of economic decline, government increase spending on transfer payments or on boosting AD, or by reducing taxes.
What is expansionary fiscal policy?
400
Is a policy which is implemented through one-off policy changes.
What is discretionary fiscal policy?
400
- The competitiveness of a country’s goods and services, which is influenced by supply-side policies, impacts how many exports the country has. - A country can become more competitive by being innovative, having higher quality goods and services, operating in a niche market, having lower labour costs. - Trade deals and being part of trading blocs can influence how much a country exports.
What are non price factors that influence net trade?
500
The wealth effect The interest rate effect The net export effect
What causes the AD curve to slope downwards?
500
The Wealth Effect Consumer Confidence Interest Rates
What is influences consumer spending?
500
Decreasing expenditure on purchases and transfer payments. Additionally, tax rates might increase. This reduces the size of the government budget deficit.
What is contractionary fiscal policy?
500
Policies which offset fluctuations in the economy. These include transfer payments and taxes. They are triggered without government intervention.
What are automatic stabilizers?
500
- Real income - exchange rates - state of the world economy - degree of protectionism - non price factors
What are the main influences on the net trade balance?
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