Reduced optimism from the business world.


  • Demand shocks ( efterfrågestörningSwedish )
  • Business world ( näringslivetSwedish )
  • GDP*, y* = potential GDP
  • LAS, LRAS = ( Long-term Aggregate Supply )  ,  ( Long-run Aggregate Supply )
  • AD = Aggregate Demand
  • e = Optimism
  • R = Interest rate
  • I = Investment
  • ( Md/P ) = Money Demand
  • ( Ms/P ) = Money Supply
  • E = Exchange rate ( växelkurs, valutakursSwedish )
  • X = Net exports ( exports - imports )



Demand shocks

Generally aggregate demand AD is affected by:

  • [ Human factor ]    - Fiscal and monetary policy.
  • [ Demand shock ] - Sudden and unexpected recession/economic downturn in the surrounding world.
  • [ Demand shock ] - Decreased optimism in the business world.


IS-LM diagram


IS-LM diagram

  1. e↓ => I↓ => y↓ => IS-shift =>   ( Md/P ) ↓   =>   ( Md/P )  <  ( Ms/P )   =>

  2. R↓ => I↑
    E↓ => X↑
    ________
    y↑


Extra stuff