Aggregate Demand

In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy (Y) at a given time and price level. It is the amount of goods and services in the economy that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country when inventory levels are static. It is often called effective demand, though at other times this term is distinguished.

It is often cited that the aggregate demand curve is downward sloping because at lower price levels a greater quantity is demanded. While this is correct at the microeconomic, single good level, at the aggregate level this is incorrect. The aggregate demand curve is in fact downward sloping as a result of three distinct effects: Pigou's wealth effect, the Keynes' interest rate effect and the Mundell-Fleming exchange-rate effect.

Read more about Aggregate DemandComponents, Aggregate Demand Curves, Debt, Criticisms

Other articles related to "aggregate demand, demand, aggregate":

AD-AS Model - Aggregate Demand Curve
... The Aggregate demand curve AD, which is downward sloping, is derived from the IS – LM model ... influences on any component of spending) or the LM curve (exogenous influences on money demand) ... The real money supply has a positive effect on aggregate demand, as does real government spending (meaning that when the independent variable changes in ...
Keynesian Cross
... The Keynesian cross diagram demonstrates the relationship between aggregate demand (shown on the vertical axis) and aggregate supply (shown on the horizontal axis ... diagram (or 45-degree line diagram), a desired total spending (or aggregate expenditure, or "aggregate demand") curve (shown in blue) is drawn as a rising line since consumers will have a larger demand with a rise in ... Aggregate demand may also rise due to increases in investment (due to the accelerator effect), while this rise is reduced if imports and tax revenues rise with ...
Aggregate Demand - Criticisms
... Austrian theorist Henry Hazlitt argued that aggregate demand is a meaningless concept in economic analysis ... theorist, argued that Keynes' study of the aggregate relations in an economy is fallacious, as recessions are caused by micro-economic factors ...
Aggregation Problem - Aggregating Individual Consumer Demand Curves Presents Several Problems. - No Interesting Properties
... text, A Course in Microeconomic Theory (Princeton 1990), “...total demand will shift about as a function of how individual incomes are distributed even holding total (societal) income fixed ... So it makes no sense to speak of aggregate demand as a function of price and societal income." Since any change in relative prices affects a redistribution of real ... Kreps goes on to say, "So what can we say about aggregate demand based on the hypothesis that individuals are preference/utility maximizers? Unless we are able to make strong ...
AD-AS Model - Shifts of Aggregate Demand and Aggregate Supply - Shifts of Aggregate Demand
... The following exogenous events would shift the aggregate demand curve to the right ... if the time frame of analysis is the short run, so the aggregate supply curve is upward sloping rather than vertical, real output would go up but in the long run with ... Aggregate demand shifts emanating from the IS curve An exogenous increase in consumer spending An exogenous increase in investment spending on physical capital An exogenous increase in intended inventory ...

Famous quotes containing the words demand and/or aggregate:

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    Friedrich Nietzsche (1844–1900)

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    Louis MacNeice (1907–1963)