Aggregate Demand Part 1
Relevant Syllabus Points:
3.3. Macroeconomic Models: Aggregate demand—components
3.4 Demand-side and supply-side policies: Shifts in the aggregate demand curve/demand-side policies [fiscal policy, interest rates as a tool of monetary policy]
Questions:
- What is Aggregate Demand?
- What are the components of Aggregate Demand?
- What shape does the curve have and why? How are the axes labelled?
- What causes a movement along the AD curve?
- What factors affect Aggregate Demand, causing it the curve shift? Categorise your answers under the four main components. Give examples and show the effects in diagrams.
Overview of the Aggregate Demand Curve:
CuteChadz gives a 2 minute overview. Note that figures given are UK based and the 2nd bullet point on Consumption is a bit confusing and so can be ignored:
mjmfoodie on AD and AS. Watch the first 4 minutes (we can use the last 1 and a half minutes later when we cover Aggregate Supply)
Why does the Aggregate Demand Curve slope downwards?
econsteve12 gives quite a thorough and clear explanation here:
Reffonomics on Slope of Aggregate Demand
What factors affect aggregate demand?
CuteChadz gives a 10 minute overview, referring to such things as loose, tight, fiscal, and monetary policy.
Specifically, what influences Consumption, the main component of AD?
pajholden gives a 7 minute 15 seconds overview:
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