 An increase in prices causes a drop in household assets, thus causing consumers to spend less.

 Increases in domestic prices reduce exports, which causes an increase in spending on imports.

 The interest rate effect is when prices increase, as does the demand for money, thus increasing the interest rate. This forces a downward pressure on investment and purchases of durable goods.

Therefore, investment, exports and consumption are all inversely related to pricing. In Samuelson's model, government spending was the only constant. This means the government will always buy the same amount of goods no matter what the price.

The aggregate demand schedule is therefore, the sum of consumption, investment, government purchases and exports. The chart below depicts the aggregate demand schedule.

Skousen, Mark. "Samuelson retreats (slightly) from socialism." Human Events, 4/194, Vol.50 Issue 12, p11, 3/4p, lbw

Paul Samuelson's contributions can be divided into four main areas. These are dynamic theory and stability analysis; consumption theory; general equilibrium theory; and capital theory.

Level Consumption Investment Gov. Purchases Exports Real Expenditures

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