Aggregate Demand & Supply Knowledge

Aggregate Demand curve slopes down from left to right, because of factors:

1. Wealth effect

2. UK exports fall in price, and increase in demand = greater demand for domestically-produced goods

3. Expectations, i.e. if consumers expect prices to rise in the future they will increase consumption

Factors affecting the (determinants of) aggregate demand:

Factors that decide decisions to invest or not:

1. Rate of interest > fall in interest rate(s), borrowing becoming cheaper and firms will want to invest in new equipment to maintain/improve their competitive position.

2. Business Expectations > i.e. when…