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Impact of Interest Rate Increase on Total Demand


Explain why a recession is likely to reduce consumer spending.


Macroeconomic Factors and Policies

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I. 🍃Introduction
- Explanation of the rise in unemployment and its impact on consumer spending
- Thesis statement: The reduction in income and increased pessimism among consumers due to unemployment leads to a decrease in spending and an increase in savings, which in turn affects prices and purchasing behavior.

II. Reduced income and reduced ability to spend
- Explanation of how unemployment leads to a reduction in income and purchasing power
- Examples of how this affects different consumer groups

III. Increased savings and fear of the future
- Explanation of how consumers tend to save more during times of economic uncertainty
- Discussion of the psychological factors that contribute to increased pessimism and fear of the future

IV. Lower prices and delayed purchases
- Explanation of how reduced demand leads to lower prices
- Discussion of how consumers delay purchases due to uncertainty about the future

V. 👉Conclusion
- Summary of the main points
- Implications for businesses and policymakers
- Suggestions for future research.

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