Please enable JavaScript.
Coggle requires JavaScript to display documents.
COMPONENTS OF AD AD = C+I+G+(X-M) (INVESTMENT (Determinants of Investment,…
COMPONENTS OF AD AD = C+I+G+(X-M)
CONSUMPTION
All spending by domestic households on goods and services during a particular period of time
Function of household income and the marginal propensity to consume (MPC)
Determinants of Consumption
Income increase, consumption increase
Wealth increase, consumption increase
Interest rates increases, consumption decreases
Household debt increase, consumption decreases
Consumer confidence increases, consumption increases
INVESTMENT
Gross domestic private investment
Measures the total spending by firms on capital equipment
Function of the national output and the interest rate
Determinants of Investment
Interest rates decreases, investment increases
Business confidence increases, investment increases
Future prices increases, investment increases
Technology increases, investment increases
Business taxes decreases, investment increases
Level of corporate indebtedness decreases, investment increases
GOVERNMENT SPENDING
Gross government investment and spending
Measures a country's government's expenditures on goods and services
Determinants of Government Spending
Political priorities increases, government spending increases
Economic priorities increase, government spending increases
NET EXPORTS (X-M)
Measures the total income earned from the sale of exports (X) to foreigners minus the total amount spend by a nation's households, firms and government on goods and services imported from other countries (M)
Export > Import - Positive
Import > Export - Negative
Determinants of Net Export
Exchange rate decreases, net exports increases
Protectionism decreases, net export increases
Income of Trading partners increases, net exports increase