Ch 14 - Aggregate Demand

________: total spending on goods and services in a time period at a given price level.

________ is the total spending by consumers on domestic goods and services.

AD shows the relationship between average price level and ________.

________: interest rates fall, consumers will have more disposable income.

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

the  relationship between average price level and real output

• More volatile and least sustainable

• Changes in income: as income rises people have to spend more

• Changes in interest rate: more incentive to save and consume less (borrowing increases, decrease in consumption)

firms investing into capital equipment machinery and premises

Rate of interest (amount firms pay to borrow money)

interest rates fall, consumers will have more disposable income

reaction of investment to the rate of change of income

• Decrease in either AD will fall (growth will fall)

• Increase in either AD will increase

a set of actions to control a nation's overall money supply and achieve economic growth.

total spending on goods and services in a time period at a given price level

consumers expect prices to rise in the future they will increase their consumption if they expect prices to fall later

firms investing into capital equipment machinery and premises

reaction of investment to the rate of change of income