Producers react by decreasing prices to clear supplies. However, as production is reduced, employees may need to be cut to reduce costs, which increases unemployment. This influence reduces family income, and therefore family spending, which affects consumption. It can also influence the terms of trade, which directly affects the purchasing power of domestic income, which affects the supply of exports and imports. Therefore, the fall in the price of iron ore from P1 to P2 leads to an aggregate reduction in demand on various AD components and on GDP which shifts the AD curve leftward from AD1 to AD2, requiring a new equilibrium to create