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Edexcel A-Level Economics AS 2.3.2 2a Influences on Consumption Disposable Income Interest Rates Consumer Confidence Questions

Practise explaining how disposable income, interest rates, confidence, welfare, credit and wealth effects change consumption and aggregate demand.

Syllabus
First assessment 2019
Course
Economics YEC11
Level
AS

Exam points

  • analyse how income-tax cuts or higher welfare payments raise disposable income and consumption
  • explain how lower interest rates or easier credit reduce saving rewards and borrowing costs
  • use confidence data and expectations about future finances to explain changes in household spending
  • apply positive or negative house-price wealth effects to consumption, AD, real output and the price level
  • evaluate policies using inflation, fiscal balance, timing, spare capacity and households' saving response

Edexcel A-Level Economics AS 2.3.2 2a Influences on Consumption Disposable Income Interest Rates Consumer Confidence Questions question 1

[Maximum number: 4]

In the first quarter of 2019 average house prices decreased by 15% in real terms in Sydney, Australia.

Explain one possible impact of this change in house prices on the level of consumption.

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