Difference between revisions of "Aggregate demand"
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Aggregate demand is represented by the '''Aggregate demand curve'''. The aggregate demand curve looks similar to a regular demand curve, however the Y-axis represents '''price level''', and the X-axis represents '''real output'''. | Aggregate demand is represented by the '''Aggregate demand curve'''. The aggregate demand curve looks similar to a regular demand curve, however the Y-axis represents '''price level''', and the X-axis represents '''real output'''. | ||
| + | |||
| + | The aggregate demand curves downwards. There are various reasons for this, including: | ||
| + | *The lower the price level, the richer individuals perceive themselves to be and the more they consume. | ||
| + | *When price levels are low, the reserve bank tends to decrease interest rates, resulting in higher consumption. | ||
| + | *A lower price level improves the international competitiveness of a country, resulting in higher net exports. | ||
==References== | ==References== | ||
Revision as of 13:06, December 16, 2008
Aggregate Demand is the total amount of goods and services, or Gross domestic product demanded by consumers at a given price level.[1]
Aggregate Demand Curve
Aggregate demand is represented by the Aggregate demand curve. The aggregate demand curve looks similar to a regular demand curve, however the Y-axis represents price level, and the X-axis represents real output.
The aggregate demand curves downwards. There are various reasons for this, including:
- The lower the price level, the richer individuals perceive themselves to be and the more they consume.
- When price levels are low, the reserve bank tends to decrease interest rates, resulting in higher consumption.
- A lower price level improves the international competitiveness of a country, resulting in higher net exports.