Aggregate Demand and Consumption

The total level of planned real expenditure on the goods and services produced within a country.

AD = C + I + G + (X-M)

Consumption, Investment, Government spending, Net exports - net imports.

Shows that if the general price level increase this will reduce the amount of real gdp in the economy.

The average or current prices across the entire goods and services produced in the economy.

The value of economic output adjusted for price changes.

Conditions that make growth difficult - pushing AD in.

Conditions that help the economy grow - pushing AD out.

Fall in exchange rate, Cuts in taxes, Increase in house prices, Low interest rates.

Reduction in government spending, Higher interest rates, Lack of investment by firms, Fall in trade with other countries.

The total money spent on final goods and services by individuals and households for personal use.

Money spent on goods and services for personal use.

Tax rates, House prices, Real income, Inflation, Interest rates, Consumer confidence, Unemployment rates.

When the government indicates an initial increase in spending, causing others to start spending and creating a ripple effect.

May not be worth the government spending so much, Hard to calculate how much people will actually spend, May not actually benefit the economy.

Income not spent and set aside.

The proportion of an increase in income that gets saved instead of spent on consumption.

The proportion of an increase in income that gets spent on consumption.

The purchase of goods that are not consumed today but are used in the future.

To replace worn out capital which has depreciated in value, Due to new technology that will make firms more efficient, Due to increases in aggregate demand that result in need for increased capacity, Due to changes in interest rates and the amount of loans available from the bank, Changes in profit made by businesses which can be re-invested.

Total investment on new capital inputs (the total amount that the economy spends on new capital)

Gross investment adjusted for depreciation of capital

Businesses invest in machinery, capital goods and expansion. This leads to increase output and GDP, better quality goods, and employment.

The idea that investment levels are related to the change in rate of GDP. If GDP is growing, investors will have more confidence.

The means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

Social protection, Health, Education, Debt interest, Defence.

Income tax, VAT, National Insurance contributions, Corporation tax, Business rates.

Financing government spending, Altering the distribution of income and wealth, Providing a welfare safety - net for families, Managing the macroeconomic policy, Improving a country's competitiveness, Tackling market failure through intervention.

Expansionary fiscal policy, Deflationary fiscal policy.

When the government increases government spending and reduces taxation to boost the economy (leads to budget deficit and increased AD)

When the government reduces spending and increases tax (leads to budget surplus and decreased AD)

Mechanisms which reduce the impact of changes in the economy on national income.

Tax collection increases, Government spending decreases, AD grows at a slower rate.

Tax collection decreases, Government spending increases, AD falls at a slower rate.

To build relationships, To get goods that cannot be produced domestically, To get goods for cheaper prices, To access a wider range of consumers.

Economic growth, Increase employment, Surplus / deficit, May put domestic businesses at risk, Can control inflation due to more competition, Increases innovation.

Real income, Exchange rates, State of the world economy, Degree of protectionism, Non price factors (quality, innovation, research and development.)