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    Aggregate demand

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    Explain using an appropriate diagram how and through what mechanisms would each of the following affect the level of aggregate demand?

    i)A sharp decline in business confidence.
    ii) An increase in the marginal propensity to consume
    iii) A fall in world income
    (draw a separate diagram for each part of the question)

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    Solution Summary

    Name which mechanisms affect the level of aggregate demand.

    $2.49

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