gcse economics - tools of the trade: aggregate demand and aggregate supply
AGGREGATE DEMAND
The total value of all of the demand in the UK economy.
It is calculated by adding together
- Consumer spending
- Business investment
- Government spending
- Exports
CONSUMER SPENDING Money spent by individuals and families on goods and services
BUSINESS INVESTMENT Money spent by businesses on improving their production e.g. stock, factories, machinery, vehicles
GOVERNMENT SPENDING Money spent by the Government on grants, roads, hospitals etc
EXPORTS Money spent by foreigners on UK goods
These are added together to calculate an approximate measure of GDP (page )
An increase in GDP is a measure of ECONOMIC GROWTH (page)
Ways of increasing aggregate demand
1. Reduce income tax and interest rates to encourage consumer spending
2. Reduce interest rates or business taxes to encourage investment
3. Government could spend more money on projects
4. Reduce the exchange rate to encourage exports and discourage imports
AGGREGATE SUPPLY
The total value of the output of the UK economy
This means the combined output / production of all of the businesses in the UK.
The greater the value of aggregate supply the higher the level of production / output by UK firms
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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