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Aggregate Demand
Price Level and Real GDP
AD Formula
Determinants(shifters) of AD
Non Econ Questions
100

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

100

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

100

What is the AD Formula?

C+I+G+(X-M)

100

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. 

 

100

Which Month has 28 days?

All of them have at least 28!

200

How is Aggregate Demand Measured?

By Summing up All of the Spending in an Economy. 

200

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

200

An Economy has the following components:

  • Household Consumption: $400 billion
  • Business Investment: $300 billion
  • Government Spending: $123 billion
  • Exports: $107 billion
  • Imports: $56 billion

Calculate the Aggregate Demand for this Economy

(C)=$400 Billion + (I)= $300 Billion + (G)=$123 Billion + (X-M)=(107 - 56)

$874 Billion

200

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).

200

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!

300

What kind of running leads to walking?

Running out of gas!

400

If you are afraid of elevators what do you do?

Take steps to avoid them.

500

Who is Mrs.Punches favorite?

Miana is the ONLY right answer!!!!!(usually)