Aggregate Economic Demand Measure
An Aggregate Economic Demand Measure is an aggregate of economic demand measure.
- Context:
- Measure Output: Aggregate Demand Value.
- It can range from being Increasing Aggregate Economic Demand to being Decreasing Aggregate Economic Demand.
- It can range from being Strong Aggregate Economic Demand to being Weak Aggregate Economic Demand.
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- Counter-Example(s):
- See: Macroeconomics, Price Level, Gross Domestic Product, Cyclical Unemployment, Effective Demand, Pigou Effect, Keynes Effect, Mundell–Fleming Model.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/aggregate_demand Retrieved:2014-3-14.
- In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy at a given time and price level. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country. 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. Additionally, the higher the price level is to be, the less demanded and thus it is downward sloping.[1]
The aggregate demand curve illustrates the relationship between two factors - the quantity of output that is demanded and the aggregated price level. The value of the money supply is fixed. There are many factors that can shift the AD curve. If the Bank were to reduce the amount of money in circulation (reducing money supply), the AD curve shifts. Nominal output is lower than before and decreases by the same amount as the decrease in the money supply. Since the price level decreased, the real balances level (M/P) will decrease - demand decreases.
If the money supply was increased and thus aggregate demand increased, there would be a movement up along the Long run aggregate supply curve. The cost of this is a permanently higher level of prices. As a result of increase in aggregate demand, the economy will gravitate toward the natural level more quickly.
- In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy at a given time and price level. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country. 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. Additionally, the higher the price level is to be, the less demanded and thus it is downward sloping.[1]
- ↑ Mankiw, N. Gregory, and William M. Scarth. Macroeconomics. Canadian ed., 4th ed. New York: Worth Publishers, 2011. Print.
2013
- http://www.investopedia.com/terms/a/aggregatedemand.asp
- 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”.