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Aggregate expenditure refers to the total amount of spending in an economy, including consumption, investment, government spending, and net exports. Aggregate demand, on the other hand, represents the total quantity of goods and services that households, businesses, and the government are willing and able to buy at different price levels. In essence, aggregate expenditure is the total spending in an economy, while aggregate demand is the total demand for goods and services at various price levels.
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What are the factor affecting aggregate Demand?
Consumption, Investment, Government Expenditure and Net Exports
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.
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 make a shift in the aggregate demand curve?
An increase or decrease in consumption, investment, government expenditure or net exports
What is IS-LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
What are the factor affecting aggregate Demand?
Consumption, Investment, Government Expenditure and Net Exports
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.
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 make a shift in the aggregate demand curve?
An increase or decrease in consumption, investment, government expenditure or net exports
What is IS-LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
What is IS LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
What is the required change in aggregate demand to bring the economy back to its long-run equilibrium?
To bring the economy back to its long-run equilibrium, the required change in aggregate demand would need to be equal to the difference between the current level of aggregate demand and the level of aggregate demand that corresponds to the long-run equilibrium. This change would need to be sufficient to close the gap between the two levels and restore balance in the economy.
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
What are Business cycles are linked to the interaction between?
the aggregate demand and aggregate supply curves.
What is the difference between demand and aggregate demand?
Demand refers to the quantity of a specific good or service that consumers are willing and able to buy at a given price. Aggregate demand, on the other hand, refers to the total quantity of all goods and services that all consumers, businesses, and governments in an economy are willing and able to buy at a given price level. In essence, demand focuses on individual products, while aggregate demand looks at the overall demand in an economy.
Derive aggregate demand curve from aggregate expenditure model?
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
What will happen when Aggregate demand and aggregate supply decrease?
When aggregate demand and aggregate supply both decrease, the result is no change to price. As price increases, aggregate demand decreases, and aggregate supply increases.
