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:
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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?
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