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

a) Decisions by firms ground in the UK to relocate overseas

Aggregate demand is delineate as the total bill of demand/expenditures in the rescue at any given price level. It is measured as

AD = C + I + G + (X - M)

The letters abbreviate the four major(ip) fates of aggregate demand. Consumption (C ) is the spending by households on goods and services. enthronization ( I ) is the spending by firms on investment goods. authorities spending (G ) includes current spending in terms of compensation and salaries, and investment in goods such as new roadstead and new schools. Exports minus imports (X - M ) shows the difference between what we grapple and what we buy from abroad.

Aggregate supply is defined as the total amount of production of goods and services in an economy.

If the decision by UK based firms to move abroad were acted upon, this would in theory lead to a decrease in aggregate demand. The AD curve would trip left to signify this. This is because there are now few firms producing goods and services for the UK and so there is slight choice in the market. As consumers now have less to buy, consumer spending, which is a component of aggregate demand, falls. Furthermore, investment is affected.



With the relocation there are less national firms to invest in, and therefore investment decreases. Another allude would be that these firms may have perhaps exported their goods and services abroad to foreign countries. After they move UK exports could see a decrease, nitty-gritty that, according to the aggregate demand equation, the difference between exports and imports provide be smaller. This factor too would conclude in a decrease in AD.

Decisions by firms to relocate abroad would in addition have an impact upon...

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