In this section we define aggregate demand, outline the appearance of the aggregate demand (AD) curve and the reasons for that appearance, and consider the factors that can shift the position of the curve.
Definition of Aggregate Demand and the Aggregate Demand Curve
Aggregate demand is the total amount of intended spending on a nation’s final goods and services by its households, firms, the government sector, and foreigners. The aggregate demand curve depicts the negative relationship between the quantity of aggregate output (real GDP) demanded and the aggregate price level (P) as shown in Figure 5-1.
Figure 5-1. The aggregate ...