Answer to Question #69726 in Macroeconomics for Heisenberg
• Interest rates, public savings, private savings, national savings, investment, net foreign investment, supply of currency, the exchange rate and the level of net exports.
Event: There is a decline in consumer confidence in the economy
Note: Ignore the detail and politics of this event. Focus only on analysing the market adjustment in each case. Fully explain all the transmission mechanism.
The household sector is thus inclined to spend less freely, especially reducing expenditures on durable goods, such as cars, houses, furniture, and appliances. Rather than spending as much, they save a little more. The result of this decrease in consumer confidence is a decrease in consumption expenditures and subsequently a decrease aggregate demand.
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