Aggregate Demand

key terms

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capital

economic fluctuations

GDP

investment

net exports

price level

aggregate demand: The amount of total goods and services demanded at a given price level.

Note: These are the same elements of GDP which measures overall output.

Price Level versus GDP graph

The graph tells us that if there is a change in the price level of the economy (say from 1 to 2) then GDP will fall (say from 100 million to 70 million).

Price Level versus GDP graph in more detail

Aggregate demand is also influenced by things other than the price level. Any change to consumption, investment, government spending, or net exports that do not have to do with changes in the overall price level will cause a shift in the aggregate demand curve.

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