It's the total level of planned real expenditure on the goods and services produced in an economy over a given time period.
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What is the Income Effect?
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What is the Interest Rates Effect?
If interest rates rise, people will save more and borrow less, meaning consumption falls and firms are less likely to invest. Firms will have to pay workers higher wages so there is higher demand for money.
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What is the Substitution Effect?
When the prices rise in one country, it makes the products in that country less attractive to foreigners, therefore exports decrease. While imports look more attractive to consumers, so consumption of goods fall.
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