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Use the aggregate demand/aggregate supply model of the economy to predict what happens to GDP, price,...

Use the aggregate demand/aggregate supply model of the economy to predict what happens to GDP, price, and unemployment levels when households increase credit card debt or usage.

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The increased use of credit card will decrease the demand for money holding. In the money market is this decreases the interest rate. As the rate of interest is reduced the investment expenditure is increased. This causes the aggregate demand to increase and aggregate demand curve to shift to the right. In the goods market there is an increase in the GDP and the price level because now there is inflationary gap and this causes the unemployment to decline.

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