Consumer Behavior and Economic Effects

What is the effect of falling unemployment on consumer behavior?

Consumer confidence grows and 𝑀𝑃𝐶 increases, shifting 𝐴𝐷 to the right.

How does a rise in asset prices create a positive wealth effect?

High net worth increases financial security, raising 𝑀𝑃𝐶 and 𝐴𝐷.

What is the outcome of high household debt on Aggregate Demand?

𝐴𝐷 shifts to the left as consumption decreases.

Define the relationship between 𝑀𝑃𝐶 and 𝑀𝑃𝑆 during debt repayment.

The 𝑀𝑃𝐶 decreases while the 𝑀𝑃𝑆 increases.

What happens to Aggregate Demand when job security increases?

Aggregate Demand (𝐴𝐷) shifts to the right.