When this happens, . . . | . . . aggregate demand increases: | But when this happens, . . . | . . . aggregate demand decreases: |
Changes in expectations: |
When consumers and firms become more optimistic, . . . | . . . aggregate demand increases. | When consumers and firms become more pessimistic, . . . | . . . aggregate demand decreases. |
Changes in wealth: |
When the real value of household assets rises, . . . | . . . aggregate demand increases. | When the real value of household assets falls, . . . | . . . aggregate demand decreases. |
Size of the existing stock of physical capital: |
When the existing stock of physical capital is relatively small, . . . | . . . aggregate demand increases. | When the existing stock of physical capital is relatively large, . . . | . . . aggregate demand decreases. |
Fiscal policy: |
When the government increases spending or cuts taxes, . . . | . . . aggregate demand increases. | When the government reduces spending or raises taxes, . . . | . . . aggregate demand decreases. |
Monetary policy: |
When the central bank increases the quantity of money, . . . | . . . aggregate demand increases. | When the central bank reduces the quantity of money, . . . | . . . aggregate demand decreases. |