Using aggregate demand and aggregate supply analysis examine the different effects on the UK economy

a) Decisions by firms found in the UK to relocate abroad center get is delineate as the total metre of demand/expenditures in the miserliness at any given value level. It is measured as AD = C + I + G + (X - M) The letters abbreviate the four major(ip) contributions of mass demand. Consumption (C ) is the disbursement by households on goods and go. coronation ( I ) is the expenditure by firms on investment goods. organization spending (G ) includes current spending in terms of fee and salaries, and investment in goods much(prenominal) as new roads and new schools. Exports minus imports (X - M ) shows the difference between what we deceive and what we buy from abroad. Aggregate furnish is defined as the total amount of production of goods and work in an economy. If the decision by UK ground firms to move abroad were acted upon, this would in theory lead to a go down in aggregate demand. The AD curve would geological fault go away to signify this. This is because there are now slight firms producing goods and services for the UK and so there is less choice in the market. As consumers now leave less to buy, consumer spending, which is a component of aggregate demand, falls. Furthermore, investment is affected.

With the relocation there are less bailiwick firms to invest in, and therefore investment decreases. Another channelise would be that these firms may have perhaps exported their goods and services abroad to inappropriate countries. After they move UK exports could see a decrease, core that, consort to the aggregate demand equation, the difference between exports and imports give be smaller. This factor too would conclu de in a decrease in AD. To illustrate the af! fect the transfer of UK based firms would have on... If you want to get a full essay, consecrate it on our website: OrderEssay.net

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