Lecture notes
Aggregate Demand & Aggregate Supply
- Module
- Business And Management
- Institution
- The University Of Kent (UKC)
Detailed notes on Aggregate Demand & Aggregate Supply
[Show more]
Seller
Follow
Content preview
Aggregate Demand & Aggregate SupplyAD definition
Aggregate demand (AD) is the total demand for goods and services produced within the
economy over a period of time.
AD components
• C = Consumer expenditure on goods and services.
• I = Gross capital investment – i.e. investment spending on capital goods e.g. factories
and machines
• G = Government spending e.g. spending on NHS, education. Note transfer payments
in the form of pensions and unemployment benefits are not included because they are
not related to output produced.
• X = Exports of goods and services. Goods leave the country but money from abroad
flows into the economy, therefore this is an increase in AD (an injection into the
circular flow)
• M = Imports of goods and services, although goods enter the country money is
leaving the economy to go to other countries, therefore AD falls.
AD curve
AD slopes downwards because:
• At a lower price level people are able to consume more goods and services because
their real income is higher.
• At a lower price level interest rates usually fall causing increased AD.
• At a lower price level, exports are relatively more competitive than imports.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller nkgnd. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67096 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now