Determinants of AD
Consumption (C), Gross Private Investment (IG), Government Spending (G), Net exports (Xn)
1) Change in consumer spending, Consumer wealth (boom in market), Household indebtedness, Taxes
2) Change in investment spending, Real interest Rates (price of borrowing $), Future Business Expectations, Productivity and Technology, Business taxes
3) Change in government spending (war), (decrease in defense spending)
4) Change in Net exports (X-M), exchange rates, national income compared to aboard
AD= GDP = C+I+G+Xn
Government spending AD->
Less Government spending AD<-
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