Knowledge 1, Analysis 2, Application 1
Knowledge and Analysis
1 mark for one impact of the link between house prices and consumption and up to 2 marks for linked expansion:
- As the value of a consumers assets fall (1AN) they feel less wealthy and start to become less confident (1AN) so they start to reduce their consumption of goods and services (1K)
- As the value of a consumer's assets fall they feel less wealthy (1AN) and reduce their consumption of goods and services (1AN) leading to a fall in AD/fall in real output and price level ( 1 K )
Application
One mark for applying to Sydney, Australia
- House prices have decreased 15\% (1)
