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33a) Aggregate Demand

The document discusses aggregate demand and its components. It defines aggregate demand as the total demand for final goods and services in an economy. The components are defined as consumption, investment, government spending, exports and imports. Sample data is provided to calculate aggregate demand for a country. The effects of changes in consumer confidence, corporate profits and competitiveness on aggregate demand are explained. It is stated that approximately 2/3 of UK aggregate demand comes from consumption and economists agree the share from exports and savings should increase to rebalance the economy.

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93 views3 pages

33a) Aggregate Demand

The document discusses aggregate demand and its components. It defines aggregate demand as the total demand for final goods and services in an economy. The components are defined as consumption, investment, government spending, exports and imports. Sample data is provided to calculate aggregate demand for a country. The effects of changes in consumer confidence, corporate profits and competitiveness on aggregate demand are explained. It is stated that approximately 2/3 of UK aggregate demand comes from consumption and economists agree the share from exports and savings should increase to rebalance the economy.

Uploaded by

Pixie
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Topic: Aggregate Demand

Q1

Define Aggregate Demand:

Using either +, – or brackets , fill in the gaps to create the equation used to calculate Aggregate
Demand:

C + I + G + X - M
Calculate the Aggregate Demand for a country if it has the following recorded data for last year (in
£bn):

=2004470

Consumption 2004000
Government consumption 300
Investment 220
Exports 360
Imports 410

Q2

Fill in the empty boxes to complete the definition of each component of AD. Remember – be precise

Component Definition
C
Consumption is goods and services

I This is the investment sector e.g. investing in other sectors, businesses

G
Government spendings is for e.g. government providing merit goods e.g. public
goods like street lamps
X
This is exports = UK firms selling abroad

M
This is imports buying products from foreign countries

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Topic: Aggregate Demand

Q3

Using at least 2 links, briefly explain what should happen to Aggregate Demand if:

a. There is a rise in consumer confidence Link 1:people would have more confidence in the
economy so they’d be willing to spend more

Link 2:people are willing to buy now rather than later


on

So AD should: shift to the right because there is a


increase in demand for goods and services

b. There is a fall in corporate profits Link 1:this will increase the interest rates and this
causes the cost of borrowing money to be higher

Link 2:there will be less investors to spend money on


capital goods

So AD should: shift to the left because there will be less


investment

c. There is a rise in the UK’s Link 1:this leads to more jobs because of the multiplier
international competitiveness effect
Link 2:the UK’s balance of payments improve

So AD should: shift to the right as there is an increase


in its exports

Q4

Fill in the gaps using the words below. You can use some twice. Some may not be needed!!:

“In the UK, approximately 2/3 of Aggregate Demand comes from consumption Economists are
agreed that government should seek to increase the share of Aggregate Demand accounted for by
exports and savings in order to rebalance the economy. Ideally, the UK would emulate Germany
which has a larger share of Aggregate Demand accounted for by exports and investments .

Choose from: government spending, exports, consumption, savings, GDP, investment, reduce,
increase, larger, smaller, Germany

Q5

True or false? In a global recession…………………..

UK consumption should increase false


UK investment should increase false

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Topic: Aggregate Demand

UK government spending should decrease true


UK exports should increase false
UK imports should decrease true

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