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Chapter 12: Macroeconomics (page 428)

What are the 4 components of aggregate demand?

Short Answer

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Consumption, Investments, Government spending, Net Exports

Step by step solution

01

Aggregate Demand Components

The four main sources of spending that are included in the aggregate demand each originate from a different sector of the economy. The four sources of spending are from

  • households(C),
  • Firms(I),
  • the government sector(G),
  • and the overseas sector(X-M).

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Most popular questions from this chapter

Why do you think gas prices rose in the recessions of the 1970s but fell after the Great Recession?

Suppose someone says, “Using monetary or fiscal policy to pump up the economy is counterproductive —you get a brief high, but then you have the pain of inflation.”

a. Explain what this means in terms of the AD-AS model.

b. Is this a valid argument against stabilization policy? Why or why not?

Why does the aggregate demand curve slope down?

What is the national income multiplier?

Determine the effect on short-run aggregate supply for each of the following events. Explain whether it represents a movement along the SRAS curve or a shift of the SRAS curve.

a. A rise in the consumer price index (CPI) leads producers to increase output.

b. A fall in the price of oil leads producers to increase output.

c. A rise in legally mandated retirement benefits paid to workers leads producers to reduce output.
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