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Aggregate Demand - Coggle Diagram
Aggregate Demand
Shifts
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SPICED - global economic events, AD falls
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Supply of Credit - banks and lenders more reluctant to lend. Interest rates on already existing loans become more expensive.
Shocks (shift in AD)
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Credit Crunch (global financial crisis) - fall in amount of credit available for borrowing by households & businesses.
Unexpected cut or rise in interest rates/taxation e.g. deep cuts in Gov spending as part of fiscal austerity.
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AD and Price Level
falling real incomes - as PL rises, real value of income fall and consumer will less likely buy items that they want.
Balance of Trade - rise in PL of country X makes foreign-produced good and services cheaper in price terms therefore exports fall and imports rise. Reduce net trade and contract AD.
Interest rate effect - PL rises, inflation and increase in demand for money.
Aggregate means 'total' and is used to measure how much is being spent by all consumers, businesses, Government, people and firms overseas.
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