Aggregate Demand

I.            The amount of GDP desired by private, public, or foreign sector to be purchased at each possible price level

II.           

a.      AD : aggregate demand = C + I + G + X = GDP

b.      PL: Price level

III.            They're inverse

a.      Wealth effect: higher price= lower purchasing power

b.      Interest effect: higher prices require higher interest rates which discourage spending and loans.

c.       Foreign trade (build the wall): higher prices = exports fall and imports rise (unless you build the wall)

IV.            Shifts can be

a.      Change in GDP

b.      Multiplier effect

c.       Increase in AD = AD -->

d.     Decrease in AD= AD <--

V.            Determinants:

a.      Δ consumption

                                i.            Consumer wealth

                              ii.            Consumer expectations

                           iii.            Household indebtedness

                           iv.            Taxes

b.      Δ investment spending

                                i.            Real interest rate

                              ii.            Future business expectations

                           iii.            Productivity and technology

                           iv.            Business tax

c.       Δ Government spending

                                i.            War (good)

                              ii.            Nationalized health care (bad)

                           iii.            Decrease in defense spending

                           iv.            Spending increase = AD -->

                              v.            Spending decrease = AD <--

d.     Δ net exports

                                i.            Exchange rates