Inflation and aggregate demand

Classified in Economy

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The multiplier effect is very important because it means that government can use relatively small changes in spending or taxation to bring about a much larger change in national output 


Rising interest rates will affect consumption and people will safe more which makes aggregate demand shift to the left , also Borrowing goes down so people consume less and makes a shift to the left in aggregate demand and finally mortgage repayments go up so there's less consumption which leads to a shift to the left in aggregate demand

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