Aggregate Demand

… a core concept in Macroeconomic Policy

aggregate demandConcept description

Aggregate demand is 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.”

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.

Source

Drawn from Investopedia, at http://www.investopedia.com/terms/a/aggregatedemand.asp, accessed 17 December 2015.

Atlas topic and subject

Economy in the Short Run: Business Cycle, Aggregate Demand & Aggregate Supply (core topic) in Macroeconomic Policy.

Page created by: Ian Clark, last modified on 13 December 2015.

Image: From the video presentation on Investopedia, at http://www.investopedia.com/terms/a/aggregatedemand.asp, accessed 17 December 2015.