Aggregate demand

the total amount of planned expenditure on goods and services at. agiven price level in an economy in a year

C + I + G + (X-M)

60

25

15

real balance effect (fall in PPP), international trade effect (decrease in the international competitiveness of UK goods and services), interest rate effect (less consumption and investment)

any component of AD changes

multiplier effect

spending by households on goods and services

disposable income

the income available to spend after the deduction of taxes

consumption / disposable income

savings / disposable income

interest rates, consumer confidence, wealth effect

the cost of borrowing or the reward for saving

the increase in capital stock

the total expenditure on new capital goods

net investment + depreciation

the fall in value of a capital asset due wear and tear and obsolescence

the new additions to capital stock after taking into account the fall in value of capital assets

gross investment - depreciation

rate of economic growth, business expectations and confidence, Keynes and ‘animal spirits’, demand for exports, interest rates, access to credit, influence of government and regulation

a tax on a firms’ profits

trade cycle, fiscal policy

the use of government expenditure and taxation to influence the level of economic activity

real income, exchange rates, state of the world economy, degree of portectionism, non-price factors

quality and design, reliability, after-sales service, transport costs