Shape Of The Ad Curve (Downward Sloping)
Economics notes
Shape Of The Ad Curve (Downward Sloping)
➡️ Aggregate Demand (AD) is the total amount of goods and services demanded in an economy at a given price level and in a given time period.
➡️ The determinants of AD are the factors that influence the level of aggregate demand in an economy. These include consumer spending, investment spending, government spending, and net exports.
➡️ Changes in any of these determinants can cause changes in the level of aggregate demand, which in turn can lead to changes in economic growth, inflation, and employment.
What factors determine the shape of the aggregate demand curve?
The shape of the aggregate demand curve is determined by a variety of factors, including the level of consumer confidence, the level of government spending, the level of taxation, the level of interest rates, and the level of international trade.
How does an increase in aggregate demand affect the economy?
An increase in aggregate demand can lead to an increase in economic growth, as businesses will be able to produce more goods and services to meet the increased demand. This can lead to increased employment, higher wages, and increased consumer spending.
What are the implications of a downward sloping aggregate demand curve?
A downward sloping aggregate demand curve implies that as prices increase, the quantity of goods and services demanded decreases. This can lead to a decrease in economic growth, as businesses will be unable to produce enough goods and services to meet the decreased demand. This can lead to decreased employment, lower wages, and decreased consumer spending.