Question

Imagine the components of aggregate demand are:

Consumption £500 billion

Investment £100 billion

Government spending £200 billion

Import spending £150 billion

Total aggregate demand £900 billion

What is the value of export spending? Explain your answer.

 

Answer 1

Total aggregate demand = C + I + G + (X – M)

£900 = £500 + £100 + £200 + (X – £150)

£900= £800 + X - £150

£900= £650 + X

X = £900 - £650

X = £250 billion. This is the export spending.

Aggregate demand is an economic measure of the total demand for all complete goods and services produced in a country. It is expressed in terms of total money spent on the goods and services at a point in time and a certain price level. It consists of all consumer goods, capital goods, government expenditure, imports, and exports.

To get export spending, add consumption, investment, government expenditure and the subtract imports. Then subtract the total from total aggregate demand.