Factors Causing An Outwards Shift in AD

A mindmap for ECON3 AQA to show the reaons why AD shifts outwards. Using C+I+G+(X-M)

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  • Created by: Gracey524
  • Created on: 03-02-15 14:21
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  • Factors Causing An Outwards Shift in AD (C+I+G+(X-M)
    • Increase in Consumer Spending
      • Increase in the demand of goods & services within society. These include durables (TVs, Cars etc) and non-durables (food&drink) which are consumed and the need for them to be replaced is essential
      • Changes in Monetary Policy
        • If interest rates fall, the cost of borrowing decreases as does the incentive to save
        • Incentives firms to borrow and invest in R&D and better capital/training
    • Increase in Investment
      • Spending on capital goods such as machinery so they are able to become more efficient and produce consumer goods in the long run.
        • Changes in Monetary Policy
          • If interest rates fall, the cost of borrowing decreases as does the incentive to save
          • Incentives firms to borrow and invest in R&D and better capital/training
    • Government Spending
      • The spending on public goods and services. Essentially produces merit goods and positive externalities for society.
      • Changes in Fiscal Policies
      • Deacrease in income taxes incentives consumers to spend as they have more disposable income
      • Increase in transfer payments - particularly if recipients spend a high % of what they get
    • Exports
      • An inflow of demand resulting in an injection of money into the country. Benefits the economy
    • Imports
      • Withdrawal of demand. A leakage from the countries net flow of income
    • Economic Events In The International Economy
      • A depreciation in the value of the pound results in imports becoming dearer and exports cheaper
  • An inflow of demand resulting in an injection of money into the country. Benefits the economy

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