Ch17 Aggregate Demand and Supply Concepts

Front

What are the four components of aggregate demand (Y)?

Back

Consumption (C), Investment (I), Government Spending (G), Net Exports (X – M). Y = C + I + G + (X – M).

Front

What are the determinants of consumption in aggregate demand?

Back

Level of disposable income, rate of interest, availability of credit, expectations, distribution of income.

Front

What factors determine investment in aggregate demand?

Back

Rate of interest, cost of capital goods, technology, changes in demand, government policy, expectations.

Front

What influences government spending in aggregate demand?

Back

Tax revenue, government policy, demographic change.

Front

What factors affect net exports in aggregate demand?

Back

Own GDP, GDP of other countries, exchange rate, price and quality competitiveness of exports and imports.

Front

Why is the aggregate demand (AD) curve downward sloping?

Back

Because aggregate demand falls when the price level rises and increases when the price level falls.

Front

What causes a movement along the AD curve?

Back

A change in the price level.

Front

What causes a shift in the AD curve?

Back

A change in any non-price level influences.

Front

What is aggregate supply (AS)?

Back

The total output that producers are willing and able to supply at a given price level in a given time period.

Front

What does the SRAS curve represent?

Back

The total output that will be supplied with no change to the prices of factors of production.