Aggregate Demand

AAA

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".

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Demand

    An economic principle that describes a consumer's desire and ...
  2. Producer Price Index - PPI

    A family of indexes that measures the average change in selling ...
  3. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  4. Demand-Pull Inflation

    A term used in Keynesian economics to describe the scenario that ...
  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) ...
  6. Supply

    A fundamental economic concept that describes the total amount ...
RELATED FAQS
  1. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Rising unemployment rates tend to decrease investor sentiment and consumer confidence. Unemployment is one of the most important ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
  7. 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 >>
  8. What do Keynes and Freidman have to do with fiscal and monetary policy?

    British economist John Maynard Keynes and American economist Milton Friedman were two of the most influential economic and ... Read Full Answer >>
Related Articles
  1. Economics

    What's Aggregate Demand?

    Aggregate demand is a macroeconomic term describing the total demand in an economy for all goods and services at any given price level in a given time period.
  2. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  3. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  4. Active Trading

    Why You Can't Influence Gas Prices

    Don't believe the water-cooler talk. Big oil companies aren't to blame for high prices.
  5. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  6. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  7. Taxes

    Do Tax Cuts Stimulate The Economy?

    Learn the logic behind the belief that reducing government income benefits everyone.
  8. Savings

    Inflation for Dummies

    Inflation may seem like a straightforward concept, but it is more complex than it appears. We examine its varieties and causes.
  9. Economics

    Sacrifices Necessary to Keep Puerto Rico Afloat

    After years of band aids and significant borrowing to meet its obligations, the time has come for meaningful reform in Puerto Rico.
  10. Stock Analysis

    Smartphone "Flagship Killers" Coming after Apple and Samsung

    Learn why flagship killers such as OnePlus and Xiaomi have the potential to become the first legitimate competition faced by Apple and Samsung.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!