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Circular Flow of Income - Coggle Diagram
Circular Flow of Income
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Aggregate Demand
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Shifts -
- AD shifts if the components of demand changes
- low interest rates lead to more consumer spending
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Determinants
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Capital Investment -
15-20% of GDP, boosted my business confidence
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Economic Cycle -
Periods of booms and bust, where in a boom there is inflationary GDP and in a recession where GDP is falling
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Exchange Rates -
A depreciation of the pound means imports are more expensive and exports are cheaper, so AD increase
Aggregate Supply
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Shifts -
- Cost of employment
- Cost of raw materials
- Exchange Rates if imported
- Government Intervention or Regulation
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Shifts in the LRAS -
- Technological Advances
- Changes to productivity
- Changes in Education and Skills
- Government Regulations
- Demographic Changes
- Competition Policy
Multiplier Process -
The effect takes place when there is an injection in an economy which leads to economic growth, leading to more jobs being created, more employment and more income
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MPC - Marginal Propensity to Consume
- How much a consumer changes their spending due to a change in income
- The higher the MPC, the higher the multiplier
MPS - Marginal Propensity to Save