5) Shifts in AD -MMT

Question 1

what factors might shift AD to the right?

Answer 1

An increase in C
An increase in I
An increase in G
An increase in X
A decrease in M

Question 2

what factors may shift AD to the left?

Answer 2

A decrease in C
A decrease in I
A decrease in G
A decrease in X
An increase in M

Question 3

what are the other leakages that behave the same way as M that might shift AD to the right?

Answer 3

A decrease in S
A decrease in T

Question 4

what are the other leakages that behave the same way as M that might shift AD to the left?

Answer 4

An increase in S
An increase in T

Question 5

an increase in income should lead to an increase in…

Answer 5

consumption, however the size of the increase in C depends on other factors

Question 6

how does the size of the increase in C depend on other factors?

Answer 6

1) low income households might be tempted to spend any increase in income
2) high income households might just save more or have to pay more in tax

Question 7

apart from the difference in consumption between low income households and high income households in a terms of an increase in income and how much they will spend, what else might change consumption resulting from a change in income?

Answer 7

might depend in expectations of the future

Question 8

how could a change in C resulting from a change in income depend on expectations of the future?

Answer 8

this is often related to the levels of confidence that households have for their economic prospects going forward, in 2023 consumers are very worried about energy bills etc, so spending is restrained and more inclined to save. if consumers were optimistic about the future they might spend more now.

Question 9

if consumers were… about the future they might spend more now

Answer 9

optimistic