Theme 2- Aggregate demand (key terms)

Question 1

Consumption (C)

Answer 1

Total planned household expenditure on goods and services - all spending by consumers

Question 2

Aggregate demand (AD)

Answer 2

Total value of planned expenditure in an economy over a period of time
Formula:
AD = C+I+G+(X-M)

Question 3

Investment (I)

Answer 3

Spending by firms on capital goods, used to increase their future production; or additions to the stock of capital goods

Question 4

Government expenditure (G)

Answer 4

Spending by government on the provision of goods and services (NHS, Education, Defence etc)

Question 5

Net trade (X-M)

Answer 5

Exports minus Imports - balance of trade