Essay about Aggregate Demand Of Real Output Demand

1814 Words Jun 21st, 2015 null Page
Aggregate demand represents the inverse correlation between the total amount of real output demanded within the economy at various price levels in a particular period of time (Investopedia). Essentially, if the price of a product fluctuates, the rate of total spending will change along with the quantity of real output demanded (Brue, McConnell, & Flynn, 2014). The determinants, which affect the aggregate demand include consumer spending, investment spending, government spending, and net export spending (Brue, McConnell, & Flynn, 2014). These determinants, also known as ‘aggregate demand shifters’, cause the aggregate demand curve to shift as a change in one or more of these variables occur (Brue, McConnell, & Flynn, 2014). For example, a rightward shift depicts an increase in aggregate demand, while a leftward shift reflects a decrease in aggregate demand (Brue, McConnell, & Flynn, 2014). Overall, the aggregate demand curve is downward sloping and it remains the same in both the short run as well as the long run (Experimental Economics Center, 2006). One of the variables, which may increase or decrease aggregate demand is net export spending (Brue, McConnell, & Flynn, 2014). For example, if the price level remains steady and net exports rise, then the aggregate demand will also increase and vice-versa (Brue, McConnell, & Flynn, 2014). A logical explanation for this increase and decrease in net export spending are exchange rates (Brue, McConnell, & Flynn, 2014). These…

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