Unit 2: Falling consumption and a shrinking economy

This BBC clip explains that a lot of the fall in aggregate demand in the UK is due to falling consumer confidence

http://news.bbc.co.uk/1/hi/business/7822334.stm

a) Explain how falling confidence effects consumption
b) Using the AD formula, explain how this leads to a fall in AD; explain any assumptions you are making
c) Show on an AD/AS diagram the effect on the AD curve and the resulting effect on output(real gdp)