test 0.2

Question 1

increase gov spending impact on AD performance

Answer 1

-AD rises, shifts right
-employement rises, workers need to meet higher demand
-multiplier affect, creates extra income increasing consumption, larger total increase in AD
- if spending on edu, infa, health, increase productive capacity
- risk of inflation

Question 2

fall of exchange rate impact on AD level of UK

Answer 2

• depriciation in exchange rate means value of the pound decreases against other currencies
  -foreign goods cost more
  -demand for Uk good rise
• AD could shift left or right