aggregate demand


Also found in: Acronyms, Wikipedia.

Aggregate Demand

The total demand of goods and services in an economy at a given overall price and time. Aggregate demand is tracked on an aggregate demand curve, which plots demand against price. When prices are rising, this indicates that the aggregate supply in the economy is inadequate to meet the aggregate demand; this leads businesses to expand their operations and produce more goods and services.

aggregate demand

the total demand for a firm's product/s. The term is also used to describe the total demand placed on a production unit in order to calculate MANUFACTURING RESOURCE PLANNING (MRP II) requirements.

aggregate demand

or

aggregate expenditure

the total amount of expenditure (in nominal terms) on domestic goods and services. In the CIRCULAR FLOW OF NATIONAL INCOME MODEL aggregate demand is made up of CONSUMPTION EXPENDITURE (C), INVESTMENT EXPENDITURE (I), GOVERNMENT EXPENDITURE (G) and net EXPORTS (exports less imports) (E):

Some of the components of aggregate demand are relatively stable and change only slowly over time (e.g. consumption expenditure); others are much more volatile and change rapidly, causing fluctuations in the level of economic activity (e.g. investment expenditure).

In 2003, consumption expenditure accounted for 52%, investment expenditure accounted for 13%, government expenditure accounted for 15% and exports accounted for 20% of gross final expenditure (GFE) on domestically produced output. (GFE minus imports = GROSS DOMESTIC PRODUCT). See Fig. 133 (a) NATIONAL INCOME ACCOUNTS.

Aggregate demand interacts with AGGREGATE SUPPLY to determine the EQUILIBRIUM LEVEL OF NATIONAL INCOME. Governments seek to regulate the level of aggregate demand in order to maintain FULL EMPLOYMENT, avoid INFLATION, promote ECONOMIC GROWTH and secure BALANCE-OF-PAYMENTS EQUILIBRIUM through the use of FISCAL POLICY and MONETARY POLICY. See AGGREGATE DEMAND SCHEDULE, ACTUAL GROSS NATIONAL PRODUCTS DEFLATIONARY GAP, INFLATIONARY GAP, BUSINESS CYCLE, STABILIZATION POLICY, POTENTIAL GROSS NATIONAL PRODUCT.

References in periodicals archive ?
I showed that, when the now-standard view about inflation was developed in the 1970s, increases in aggregate demand above levels consistent with full employment were actually few, short-lived, and small, and that past inflation jumps had been incorporated into future expectations not rapidly, but slowly over time.
On the other hand, whereas loosening would strengthen the outlook for growth by stimulating domestic aggregate demand through reduced cost of borrowing, it could aggravate upward trend in consumer prices and generate exchange rate pressures.
Average Consumer Price Index (CPI) inflation during 2017-18 is expected to increase by around 6 per cent as anticipated higher aggregate demand, greater monetary expansion and impact of rising global prices would put upward pressure on inflation.
Self-described Keynesians believe that recessions - or at least, most of them - are caused by shortfalls in aggregate demand, which the government then needs to rectify.
In the eurozone, for example, aggregate demand in many member countries has been constrained by, among other things, Germany's large current-account surplus, which amounted to 8.
Improvement in aggregate demand and, as a result, inflation closing on its target, is supported by both the phasing out of the tight monetary policy and fiscal stimulus.
The implicit assumption in previous studies is that the aggregate demand for lottery tickets ([X.
For example, reducing the size of the state-enterprise sector is necessary, yet would be certain to depress aggregate demand at a time when demand is already soft.
Keywords Inflation * Exchange rate * Aggregate demand * Elasticity
Public-sector investment is now below the level needed to sustain robust growth, owing to its insufficient contribution to aggregate demand and productivity gains.
The authors look at local labor markets to study the reallocation effect from growing trade with China, in which declining manufacturers move to new opportunities, and study aggregate demand effects by which domestic consumption and investment may be depressed, extending employment losses to sectors not otherwise exposed to import competition.
Q3 aggregate demand at the Susan Lake Pit increased significantly compared with the first half of the year, and aggregate demand is expected to remain active through Q4 2014.

Full browser ?