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→ more spending
→ higher price level
inflation?
This rightward shift puts upward pressure on the price level — contributing to demand-pull inflation.
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→ injection into economy
→ MPC matters
bigger MPC = bigger multiplier??
The Keynesian Multiplier describes how an initial injection of spending generates a magnified increase in national income.
The size depends on the MPC: the higher the MPC, the larger the multiplier.
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A-level Economics: three words in, full exam answer out.
- income up
- more spending
- prices rise??
- link to inflation
Aggregate Demand (AD) is the total demand for goods and services at a given price level: AD = C + I + G + (X−M).
A rightward shift occurs when national income rises, fuelling higher consumer expenditure (C↑) — shifting the AD curve rightward at all price levels.
Near full capacity, rightward AD → higher price level → demand-pull inflation. In recession, the effect is primarily a rise in real GDP.
Exam tip: Always evaluate where on the AS curve the AD shift occurs. Distinguish between the Keynesian horizontal range and classical vertical range — this earns evaluation marks.
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