Aggregate Demand

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DEFINITION of 'Aggregate Demand'

The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally there is a negative relationship between aggregate demand and the price level. Also known as "total spending".

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BREAKING DOWN 'Aggregate Demand'

Aggregate demand is the demand for the gross domestic product (GDP) of a country, and is represented by this formula:

Aggregate Demand (AD) = C + I + G + (X-M) C = Consumers' expenditures on goods and services. I = Investment spending by companies on capital goods. G = Government expenditures on publicly provided goods and services. X = Exports of goods and services. M = Imports of goods and services.

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RELATED FAQS
  1. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
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    Rising unemployment rates tend to decrease investor sentiment and consumer confidence. Unemployment is one of the most important ... Read Full Answer >>
  3. How does contractionary fiscal policy lead to the opposite of the crowding out effect?

    According to general equilibrium models in contemporary macroeconomics, expansionary fiscal policy could cause crowding out ... Read Full Answer >>
  4. What is demand-side economics?

    Demand side economics is based on the belief that the main force affecting overall economic activity and causing short-term ... Read Full Answer >>
  5. How do fiscal and monetary policies affect aggregate demand?

    Aggregate demand is a macroeconomic concept representing the total demand for goods and services in an economy. This value ... Read Full Answer >>
  6. What factors cause shifts in aggregate demand?

    Aggregate demand, or AD, is defined as the total amount of goods and services consumers are willing to purchase in a given ... Read Full Answer >>
  7. What is the effect of a fiscal deficit on the economy?

    Fiscal deficits arise whenever a government spends more money than it brings in during the fiscal year. This imbalance, sometimes ... Read Full Answer >>
  8. Why is Keynesian economics sometimes called demand-side economics?

    Because Keynesian economists believe the primary factor driving economic activity and short-term fluctuations is the demand ... Read Full Answer >>
  9. What do Keynes and Freidman have to do with fiscal and monetary policy?

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