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- how much consumers have confidence in purchasing goods + services
- connects to income and employment

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the total spending on goods and services in a period of time at a given price level. 

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- determines savings and costs of borrowing

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- determined by stock prices, houses

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- As personal income tax rates increase, the disposable income of consumers decrease --> consumer confidence drops.

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- how much producers have confidence in producing goods + services

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- determines savings and costs of borrowing

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- When there is development in technology, the competitiveness of firms increase.

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- As business tax decreases, after-tax profit increases. --> leads to increased producer confidence

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- have to spend on many sectors like merit goods, unemployment benefits, social welfare --> opportunity cost

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- Foreigners buy more import → export becomes larger → net export becomes larger → AD increases

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- Strong currency: exports are made expensive to foreigners. Imports are made cheaper → import rises.

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- There could be protectionist policies.