Aggregate Demand

Aggregate Demand

The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally there is a negative relationship between aggregate demand and the price level. Also known as "total spending".

Notes:

Aggregate demand is the demand for the gross domestic product (GDP) of a country, and is represented by this formula:

Aggregate Demand (AD) = C + I + G (X-M)

C = Consumers' expenditures on goods and services.

I = Investment spending by companies on capital goods.

G = Government expenditures on publicly provided goods and services.

X = Exports of goods and services.

M = Imports of goods and services.

See also: Aggregate Supply, Consumer Price Index - CPI, Cost-Push Inflation, Demand-Pull Inflation, Gross Domestic Product, Inflation, Producer Price Index - PPI