Explain factors that can influence the aggregate demand of a country.
There are several factors that have different effects on the aggregate demand of a country: the introduction of new technology, the government's agenda and interest rates. All of these factors can be plotted as a representation of the economic cycle, where different stages will reflect different levels of AD. Technology is the application of scientific knowledge for practical purposes within an industry. New technology such as computers and machinery will improve efficiency, this efficiency allows for less human hassle and more of the final product at a cheaper expense. This means a company can produce more products at a cheaper price, saving money as well as making it. A practical example would be within a Coca Cola factory. A machine capping 100 bottles a minute is more efficient than a human capping 10. This new technology would also increase capacity utilisation, more effective use of capacity allowing for more technology and ultimately more profits. The technology would have a positive impact on most of the components of aggregate demand. Investment would go up as more companies are investing in a wider variety of technology. Also net exports would increase as there is a trade surplus which proves the efficiency of production. Consumption would also increase as the more products being created, the more there is for people to buy and therefore they do. Technology would have an overall positive effect on aggregate demand as most factors would increase having the same effect on the total. .
The government's agenda is their activities throughout the whole economic process, including the elections every 4 years and their economic objectives change the AD depending on the economic situation. The different economic situations will change government spending which will have a big effect on the aggregate demand. During a recession economic growth will be low this means government spending will be high in order to inject money into the economy; which will force aggregate demand to go up.
