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Aggregate demand - Coggle Diagram
Aggregate demand
Consumption
Sources:
Wages
Pension
Stock Exchange
Savings
Marginal propensity: How much change in consumers' spending due to change in income
Disposable income: Income after tax
Mpc formula: Change in consumption / Change in income
Factors affecting C
Consumer confidence
Expectation
Asset price
Average propensity: Average expenditure level out of total disposable income in an economy
Government
Capital spending - infrastructure/buildings
Welfare spending - biggest chunk of G
Current spending - wages, spending
Debt interest payment
budget deficit vs national debt
Budget deficit: Expenditure-Income
National debt: Total budget deficit over time
Characteristics
Definition
The total demand for goods and services within a country
AD = Consumption + Investment + Government + Net Export
Types
Consumer: amount of consumers spend on goods and service
Government: Spending of government on public facilities
Investment: spending from business (mostly from private firms)
Net Export (Export - Import): Balance of payments
Reasons for shift
High confidence => more investment
The wealth effect
Change in interest rates
Tax rate
Government spending
Weakening/Strengthening pound
Investment
Types
Gross Investment: measures investment before depreciation
Net investment: Measures investment after depreciation
Influences
The accelerator theory
Costs
Interest rates
Access to profit
Retained profit
The world economy