mod2;revision:

Government spending decisions are influenced by a several factors:
*the government view on the extent of market failure and it is chance and ability to correct it.
*the level of economic activity in the economy can have an infuence in government spending. (high level of uneployment may lead an increase in government spending and it will be shift to the right in AD and the out put in the economy.If it the high level of inflation the government may reduce government spending
*increase in health,education,transport the desire is made by voters, this can be made by desire to please the electorate(voters)  the government may win electorate by increasing in health,education,transport etc before election.
*WAR,TERRORISM,RISING CRIME, may have an increse in government spending.
Net exports (exports-imports) the influence on export revenue and import:
*real disposable income abroad - a rise in income abroad is likely ro result in more exports being sold.
*real disposable income at home - a rise in income in the own country may lead to fall in exports ( because firms may use goods from exports to the home thus will increase in AD.
*the domestic price level - the amount of exports may fall and the value of imports rise.If the domestic price level rises relative to the price levels in the country's trading partners.
*the exchange rate - a fall in a country's exchange rate will reduce the price of exports and raise the price of imports casued by inflation rates. this os likely to result in a rise in exports revenue and a fall in imports expenditure.If it will rise in rate is likely to result in fall in net exports.
*government restrictions on free trade - a country's net export
*Government restrictions on free trade - when a country's net exports may rise if other countries governments remove limits.(tariff-a tax on imports)
The relationship between AD and the price level.
There're 3 effects which explain why the AD curve is downward sloping (going down):
*the wealth effect - changes in housholds and firms real wealth when the price level changes. When the price level is fall it leads to increase in amount of goods and services that wealth kept in bank accounts and other financial assets in the form of money. It it a rise in the price level  it leads to reduce the price level  in purchasing power of wealth and it cause in AD to contract.
*the rate of interest bonds - if it increase in price level it can lead to sell financial assets (government bonds -a financial assets issued by the central government as a means of borrowing money)
to recive more money to pay a higher cost. Increase in the supply of government bonds to reduce their price.
*the international trade effect - increase in the price level will not lead to increase in prices and rate. It will have an effect on firms and housholds to buy more from foreign producers and less form domestic producers => net export would fall anf demand will contract.