2.2.1 The characteristics of AD

• What is the definition of aggregate demand (AD)?

  Total demand for goods
• Aggregate Demand (AD) is the total demand for goods and services in an economy at a given price level and time period
• Consumption includes both durable and non-durable goods.
• What does investment in aggregate demand refer to?

  Business spending on capital
• Government Spending (G) includes expenditures on public goods and services such as education and healthcare
• Net exports are calculated as exports minus imports.
• What is the formula for aggregate demand?

  AD = C + I + G + (X – M)</latex>
• Match the component of AD with its definition:

  Consumption (C) ↔️ Household spending on goods

  Investment (I) ↔️ Business spending on capital

  Government Spending (G) ↔️ Public sector expenditures

  Net Exports (X – M) ↔️ Exports minus imports
• What does consumption in aggregate demand represent?

  Household spending on goods
• Positive net exports increase aggregate demand, while negative net exports decrease
• The formula for aggregate demand is AD = C + I + G + (X – M).
• Which component of AD includes public sector spending on infrastructure?

  Government Spending (G)
• Household spending on goods and services is referred to as consumption
• Exports add to aggregate demand, while imports subtract from it.
• What is the mathematical expression for aggregate demand?

  $AD =$$C +$$I +$$G +$$(X – M)$
• Positive net exports increase aggregate demand, while negative net exports decrease
• What is the definition of net exports in the context of aggregate demand?

  Exports minus imports
• The aggregate demand formula is expressed as AD = C + I + G + (X – M)
• What type of spending does consumption refer to in aggregate demand?

  Household spending
• What type of spending does investment refer to in aggregate demand?

  Business spending
• Net exports increase aggregate demand if they are positive.
• What is aggregate demand defined as?

  Total demand for goods
• Order the components of aggregate demand from most to least common:

  1️⃣ Consumption

  2️⃣ Investment

  3️⃣ Government Spending

  4️⃣ Net Exports
• What are examples of government spending that contribute to aggregate demand?

  Infrastructure, education, healthcare
• What does the aggregate demand curve illustrate?

  Price level vs. quantity demanded
• A movement along the AD curve is caused by a change in the price level.
• What are factors that can shift the aggregate demand curve?

  Consumer confidence, investment, government spending, net exports
• A movement along the AD curve shifts the entire curve to the left or right.

  False
• What does higher consumer confidence do to the aggregate demand curve?

  Shifts it to the right
• What does increased investment spending do to the aggregate demand curve?

  Shifts it to the right
• What does higher government spending do to the aggregate demand curve?

  Shifts it to the right
• Higher net exports shift the aggregate demand curve to the right.