2. ComponentsThe sum of all total planned expenditure in an
economy at a general given price level per period C = Consumption I
= Investment G = Government Spending X-M = Net Exports 3.
Consumption This is spending by households on good andservices to
meet its wants. E.g. Food and Clothes or TV Service Influences
Disposable Income, the more consumers havetypically the higher AD
Distribution of Income, an even distribution causes agreater rise
in AD Availability of Credit, is credit is cheap then ADrises, if
not AD falls 4. Investment Spending by Businesses on capital goods
e.g.Factories. Influences Changes in income, as incomes rise,
people demandmore so businesses invest to cope with demand Rate of
Interest, a lower rate will stimulateinvestment as the cost of
borrowing is low Profit Level, if profits are expected to be high
Government Policy, lower corporation tax etc 5. Government Spending
Spending by Government Main areas are Social Security,
Health,Education and Defence Influences Public Opinion State of the
Economy Market Failures 6. Net Exports This is total exports (X)
minus total imports (M) Influences on Net Exports Domestic Income,
if incomes are high we tend tosuck in imports, which lowers AD
Foreign Income, if incomes in other countries rise,they will suck
in British Exports Exchange Rates if the currency is weak
againstanother then it will encourage exports 7. AD on GraphsNotes
on the Graph X Axis is Real Output Y Axis is Price Level A movement
along the D curve will be caused by a movement of the AScurve 8.
Shifts of the Curve If any component changes AD it will cause a
shift. Should the change be an increase the curve shiftsto the
right, if it is a decrease it shifts to the left
