Aggregate Demand
What is Aggregate Demand?
• All the Goods & Services (Real GDP) that Buyers are Willing and Able to Purchase at Different Price Levels.
• The demand for Everything by Everyone in a Country
What is the Relationship Between Price Level and Real GDP?
There is an Inverse Relationship between Price Level and Real GDP.
• If the price level INCREASES(inflation), Real GDP demanded DECREASES
• If the price level DECREASES(deflation), Real GDP demanded INCREASES
What is the AD Formula?
C+I+G+(X-M)
What would Shift the Aggregate Demand Curve, and what would make the Aggregate Demand Curve Downward-Sloping?
Downward Slope Reasons:
• The Wealth Effect
• The Foreign Trade Effect
• Interest Rate Effect
AD Curve Shifter Examples:
• (Increase) Tax cuts, higher confidence, lower interest rates, increased government spending, a weaker dollar, and if foreign income rises.
• (Decrease) Higher taxes, less confidence, higher interest rates, reduced government spending, a stronger dollar, and if foreign income falls.
• (Movements Along Curve) Can only be caused by a change in the overall price level.
Which Month has 28 days?
All of them have at least 28!
How is Aggregate Demand Measured?
By Summing up All of the Spending in an Economy.
If Nominal GDP is $2100M and the price index (base year 2010=100) is 104 in 2011, what is Real GDP?
$2019 Million
(2100 / 104 * 100) =2019
An Economy has the following components:
Calculate the Aggregate Demand for this Economy
(C)=$400 Billion + (I)= $300 Billion + (G)=$123 Billion + (X-M)=(107 - 56)
$874 Billion
An Unexpected Boom in the Stock Market causes People to Feel Wealthier and have More Confidence. What happens to AD?
AD Increases (shifts right) due to Increased Consumer Spending (C).
Mr. Blue lives in the Blue House. Mr. Yellow lives in the Yellow House. Mr. Black lives in the Black House. Who lives in the White House?
The President!
What kind of running leads to walking?
Running out of gas!
If you are afraid of elevators what do you do?
Take steps to avoid them.
Who is Mrs.Punches favorite?
Miana is the ONLY right answer!!!!!(usually)