Aggregate demand is the total or aggregate quantity of output that is willingly bought at a given level of prices, other things held constant. Aggregate demand is the desired spending in all product sectors: consumption, private domestic investment, government purchases of goods and services, and net exports. It has four components:
1. Consumption. It is determined by disposable income, which is personal income less taxes. Other factors affecting consumption are long-term trends in income, household wealth, and the aggregate price level. Aggregate demand analysis focuses on the determinants of real consumption (that is, nominal or dollar consumption divided by the price index for consumption.)
2. Investment.Investment spending includes purchases of structures and equipment and accumulation of inventories. The major determinants of investment are the level of output, the cost of capital (as determined by tax policies along with interest rates and other financial conditions), and expectations about the future. The major channel by which economic policy can affect investment is through monetary policy.
3. Government spending .A third component of aggregate demand is government spending on goods and services: purchases of goods like tanks or road-building equipment as well as the services of judges and public-school teachers. Unlike consumption and investment, this component of aggregate demand is determined directly by the government’s spending decisions.
4. Net exports.A final component of aggregate demand is net export, which equals the value of exports minus value of imports. Imports are determined by domestic income and output, by the ratio of domestic to foreign prices, and by the foreign exchange rate of the dollar. Exports (which are imports of other countries) are the mirror image of imports, determined by foreign incomes and outputs, by relative prices, and by foreign exchange rates. Net exports, then, will be determined by domestic and foreign incomes, relative prices, and exchange rates.
Task 1. Translate the text “What is finance?”
Task 2. Translate the words into English:
- to adapt
- the quality
- general trends
Task 3. Put at least five questions to the given text in the Task 1.
Task 4. Open the brackets using Present Continuous or в Present Simple.:
1. The children (not to eat) soup now.
2. You (to play) volley-ball well?
3. When you (to play) volley-ball?
4. What Nick (to do) in the evening?
5. He (to go) to the cinema in the evening?
Task 5. To make up at least three sentences using the words from the Task 2.
What is finance?
"Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process of acquiring needed funds. Because individuals, businesses and government entities all need funding to operate, the field is often separated into three sub-categories: personal finance, corporate finance and public finance.
All three categories are concerned with activities such as pursuing sound investments, obtaining low-cost credit, allocating funds for liabilities, and banking. Yet each has its own specific considerations. For example, individuals need to provision for retirement expenses, which means investing enough money during their working years and ensuring that their asset allocation fits their long-term plans. A large company, on the other hand, may have to decide whether to raise additional funds through a bond issue or stock offering. Investment banks may advise the firm on such considerations and help them market the securities. As for public finance, in addition to managing money for its day-to-day operations, a government body also has larger social responsibilities. Its goals include attaining an equitable distribution of income for its citizens and enacting policies that lead to a stable economy.