Aggregate demand (AD)
Definition
Aggregate demand refers to the total amount of goods and services that all sectors in an economy are willing and able to purchase at different price levels during a given time period.
Analogy
Imagine aggregate demand as a shopping list for an entire neighborhood. It includes everything people want to buy, like groceries, clothes, electronics, etc., at various prices.
Related terms
Consumer spending: Consumer spending is the portion of aggregate demand that comes from individuals purchasing goods and services.
Investment spending: Investment spending refers to businesses' expenditures on capital goods such as machinery or buildings.
Government spending: Government spending represents the amount spent by federal, state, and local governments on public goods and services.
"Aggregate demand (AD)" appears in:
Study guides (8)
AP Macroeconomics - 3.5 Equilibrium in Aggregate Demand-Aggregate Supply (AD-AS) Model
AP Macroeconomics - 3.7 Long-Run Self-Adjustment
AP Macroeconomics - 3.8 Fiscal Policy
AP Macroeconomics - 5.1 Fiscal and Monetary Policy Actions in the Short-Run
AP Macroeconomics - 5.2 The Phillips Curve
AP Macroeconomics - 5.5 Crowding Out
AP Macroeconomics - 5.7 Public Policy and Economic Growth
AP Macroeconomics - 6.3 Foreign Exchange Market
Practice Questions (4)
- Which of the following is a component of aggregate demand (AD)?
- Which of the following is a component of aggregate demand (AD) in the economy?
- An increase in aggregate demand (AD) causes:
- What happens to inflation and unemployment when there is an increase in aggregate demand (AD)?
Resources
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