Consumption
Consumption (C) is household spending on goods and services. It is the largest component of AD in most developed economies (typically 60-65% of GDP). Consumption depends on income, wealth, interest rates, and consumer confidence.
Real World
When UK house prices fell 15% during the 2008 financial crisis, consumers felt less wealthy and cut back spending — John Lewis reported its first profit warning in decades as discretionary purchases dropped sharply.
Exam Focus
Link consumption changes to a specific determinant (e.g. confidence, interest rates) rather than vaguely stating 'consumption fell'.
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