There are the three reasons why aggregate demand is downward slope: real wealth effect, interest rate effect, exchange rate effect. In a case scenario the market saw an increase in consumer spending when there is a boom in economy. Or the economic crisis makes the public bit shy to buy or consume any product. In the above two situations: the transfer payment does not make the part of government spending as the public will spend the money given as self-security and
Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations?
- Widespread fear of recession
- The appreciation in the Pakistani Rupee rate
- A boom in the stock market
- An increase in transfer payment
- A decrease in real interest rate in Pakistan
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