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an increase in price level would lead to a fall in AE, vice versa. So by plotting those points out, you can derive an AD curve

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Q: Derive aggregate demand curve from aggregate expenditure model?
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How do you derive and discuss the aggregate demand curve by using both graphical and mathematical derivations?

How to Derive Demand curve mathematically. In Simple Language With simple Examples.


Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?

Aggregate demand curve.


What make a shift in the aggregate demand curve?

An increase or decrease in consumption, investment, government expenditure or net exports


How would a rise in business affect the aggregate demand curve?

The aggregate demand curve shifts to the right


How would a rise in the business investment affect the aggregate demand curve?

The aggregate demand curve shifts to the right


What the primary difference between aggregate demand curve and individual demand curve?

aggregate demand curve is the total sum of all the individual demand curves while individual demand curve is the demand made by the single individual.


Explain movements along the aggregate demand curve and shifts of the aggregate demand curve?

Movements along the aggregate demand curve are caused by changes in price level - real wealth effect, interest rate effect and open economy effect. If some non-price level determinant causes total spending to increase/decrease then the curve will shift to the right/left - consumption, investment, government expenditure, net exports.


What is Simple theory of Income Determination?

Total income depends on total employment which depends on effective demand which in turn depends on consumption expenditure and investment expenditure. Consumption depends on income and propensity to consume. Investment depends upon the marginal efficiency of capital and the rate of interest. J. M. Keynes made it clear that the level of employment depends on aggregate demand and aggregate supply. The equilibrium level of income or output depends on the relationship between the aggregate demand curve and aggregate supply curve. As Keynes was interested in the immediate problems of the short run, he ignored the aggregate supply function and focused on aggregate demand. And he attributed unemployment to deficiency in aggregate demand.


What factors change and what factors remain the same when there is a movement along the aggregate demand curve?

The aggregate demand curve shows the relationship between the quantity of real GDP demanded and the price level when other influences on expenditure plans remain the same. When there is a movement along the aggregate demand curve, the price level changes and other factors such as expectations, fiscal and monetary policy, and the world economy remain the same


Aggregate demand and Aggregate supply curve?

The aggregate demand curve show what consumers are willing to buy at a given price level, whereas the aggregate supply curve shows what producers are willing to produce at a given price level.


Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?

AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped


Ceteris paribus the price level will fall when A The aggregate supply curve shifts to the left B The aggregate demand curve shifts to the left C The aggregate demand curve shifts to the right?

b