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AD (Government Spending the amount of money that is spent by the…

- - - - budget deficit/ fiscal deficit
        
        the amount of money a government has to borrow to finance its spending for one year
    - - National Debt
        
        total amount of money a g owes
    - - selling bonds
  - - - demand pull inflation
        
        unemployment falls
      - G more than taxes
        
        increase in national debt
    - - Malignant deflation
        
        unemployment rises
      - G less than taxes
        
        decrease in national debt
- - - - Increase in spending / increase in income
        
        UK = 0.8
    - - UK= 1 / 1 - 0.8
- - - - Consumption Function, income rises spending rises
        
        DI = income - tax
    - - increase in wealth = increase in spending
    - - tight monetary policy
        
        amount of borrowing down, amount of saving up
      - expansionary mp
        
        amount of borrowing up, amount of saving down
    - - positive
        
        cs rises
      - negative
        
        cs falls
    - - creeping inflation
        
        less than 10%
        
        CS decrease
      - hyperinflation
        
        above 100%
        
        CS increase
    - - easy availability
        
        CS increases
      - not easy availability
        
        CS decreases
    - - 18-12, 100%
        
        22-30, 100%
        
        31-55, 100%
        
        56-70, saving
        
        70+, 100%
- - - - tight monetary policy
        
        borrowing decreases, saving increases
      - expansionary MP
        
        borrowing increases, saving decreases
      - Marginal Efficiency of Capital Theory
        
        inverse relationship between I?R and investment
    - - reduction of corporation tax
        
        investment increases
    - - Price rises
        
        investment decreases
    - - Boom, firms more confident
        
        increase in investment
      - recession firms less confident
        
        decrease in investment
      - main factor which determines investment
        
        J.M Keynes described business confidence as being like “animal spirits”
    - - increase in investment
    - - positive relationship
        
        Increase in CS, Increase in investment
    - - Accelerator Theory
        
        level of investment is determined by past changes in real GDP
      - large change in GDP
        
        investment high
      - small change in GDP
        
        investment low
- - - - ER rises, price of exports rise, price of imports fall
        
        decrease in demand pull inflation
    - - Country in boom
        
        UK exports rise
      - Country in a recession
        
        UK exports fall
    - - In a boom
        
        imports rise
      - In a rescission
        
        Imports fall
    - - UK prices becoming relatively more expensive
        
        Increase in demand for foreign imports
        
        decrease in demand for foreign exports
    - - with protectionsim
        
        reduce amount of imports coming into a country
      - Without protectionism
        
        increase imports coming into a country
      - Increase in imports/ decrease in exports
        
        increase in malignant deflation
        
        unemployment rises
      - increase in exports/ decrease in imports
        
        increase in demand pull inflation
        
        unemployment falls
- - - - increase
        
        Foreign money attracted into the UK economy
        
        Increase in D for £
        
        Appreciation
      - decrease
        
        Foreign money taken out of UK economy
        
        decrease in D for £
        
        Depreciation
    - - country in a boom
        
        demand for UK exports rises
        
        UK producers want to be paid in pound
        
        Appreciation
      - Country in a recession
        
        demand for UK exports falls
        
        UK producers not paid as much
        
        Depreciation
    - - UK boom
        
        demand increases for imports
        
        Germany want to be paid in Euros
        
        Depreciation
      - UK recession
        
        demand decreases for imports
        
        Germany not paid as much
        
        Appreciation
    - - Government wants to increase ER
        
        Government buy bonds of foreign exchange market
        
        increase in D for £
        
        Revalues
      - G wants to decrease the ER
        
        G sell pounds of foreign exchange market
        
        decrease in D for £
        
        Devalues
    - - think future value increase, buy currency
        
        demand increases
        
        Appreciation
      - think future value decrease, sell currency
        
        demand decreases
        
        Depreciation