Aggregate demand
Definition
Aggregate demand refers to the total amount of goods and services that all sectors of an economy are willing and able to purchase at a given price level and period of time.
Analogy
Think of aggregate demand as a shopping list for the entire economy. Just like how you make a list of things you want to buy, aggregate demand represents the combined desires of consumers, businesses, and the government to purchase goods and services.
Related terms
Consumption: The spending by households on goods and services.
Investment: The spending by businesses on capital goods such as machinery or buildings.
Government spending: The expenditures made by the government on public goods and services.
"Aggregate demand" appears in:
Subjects (1)
Study guides (4)
Additional resources (2)
Practice Questions (15)
- What does aggregate demand refer to?
- What is the main difference between market demand and aggregate demand?
- Which of these scenarios can lead to an increase in aggregate demand?
- What effect does the removal of a tariff on imported goods have on a country's aggregate demand?
- Which factors can influence aggregate demand?
- What effect does the British Government decision to shrink its military have on aggregate demand?
- How does severe drought in China affecting the country's inflation rate impact aggregate demand?
- How does a decrease in government spending affect aggregate demand?
- How does an increase in investment spending by Italian firms impact aggregate demand?
- What happens to aggregate demand when consumer confidence soars?
- Which of the following best describes a determinant of aggregate demand?
- In the short run, how does contractionary fiscal policy affect aggregate demand and the price level?
- What impact does the decrease in aggregate demand have on a country's currency?
- What is the impact of a decrease in net exports on aggregate demand?
- What is the impact of an increase in net exports on aggregate demand?
Resources
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.