In macroeconomics, consumption expenditure affects the economy through aggregate demand. Economists include it as an item in aggregate demand in addition to business investment, government spending, and net exports. Thus, when consumption expenditure
How does Unemployment Impact Individuals, Society, Businesses, and the Economy?
Unemployment has wide implications. It doesn't just have consequences on the individual. But, it also impacts society, business, and the economy. For example, unemployment causes: Higher poverty and crimeDecrease in business revenueIncreased
Short-run Macroeconomic Equilibrium and Its Implications for the Economy?
What's it: A short-run macroeconomic equilibrium occurs when the aggregate demand curve and the short-run aggregate supply curve intersect. It determines the actual output (real GDP) and the price level in the economy. Equilibrium may be
Competitive Market: Characteristics and Examples
What it's: A competitive market refers to a market characterized by intense competition in which no player has a dominant power. It is identified as a perfectly competitive market with many buyers and sellers. And they individually cannot
Which Factors Affect Consumption Expenditure?
Several factors affect consumption expenditure. Disposable income comes first. Without it, there is no income to buy the product. Other factors include consumer confidence, wealth, income expectations, inflation, and interest rates. Why is it
Supply Shock: Examples, Causes, Effects
What's it: A supply shock is a sudden and unexpected event causing a dramatic change in output. It can be positive or negative. It is positive if it increases output and negative if it decreases output. Shocks here can refer to macroeconomic
Long-Run Aggregate Supply: Its Curve And Influencing Factors
What's it: Long-run aggregate supply (LRAS) refers to the total output produced in the economy when all inputs are variable. Wages and other inputs are flexible and change proportionately in response to changes in the price level. Thus, firms
Consumer Spending Patterns: Influencing Factors
What's it: Consumer spending patterns are changes over time in the total money individuals spend on goods and services for personal use. It also refers to the relative proportion of what an individual consumes. Comparisons may be based on time
How Exchange Rates Affect Aggregate Demand and the Economy
Exchange rates affect aggregate demand through their effects on exports and imports. Specifically, it affects the relative prices of imported or exported goods and, ultimately, their competitiveness and demand. For example,