Aggregate demand is defined as the total desired purchases by all buyers in an economy. It is also the total quantity demanded for all goods and services at a different price level at a certain period of time. Aggregate demand is a downward slopping curve as refer to the diagram below.
Based on the article, the economy world these days need more aggregate demand as the curve determines the real GDP and stimulates the economy at a certain period of time. By the aggregate demand curve, governments can determine the level of unemployment rate and the status of the economic growth. Therefore, after determining the problems the government will have a solution to face the economy problems that the country is going through. Not only that, it is stated in the article that the aggregate demand curve can also improve the countries inflation or recession problems as government will implement such policies. Sooner or later at a certain point, the world economy will definitely be growing rapidly but in reality right now our economy is going through a very bad time. In conclusion, if there are more aggregate demand models around the economy world, economist will be able to determine the economy status easier and faster before the economy gets worsen.
Entry by: Ika Adnan
What is the relationship between the price level and the real GDP in Aggregate Demand.. ?
ReplyDeleteThe relationship between the price level and the real GDP in Aggregate Demand is negative relationship. When the market price goes up, the real GDP will fall and Vice-Versa.
ReplyDeleteWhat are the effects contributing to the downward sloping Aggregate Demand curve?
ReplyDeleteThis is due to the factors: Real wealth effect, interest rate effect and foreign purchase effect and the negative relationship between the market price and the real GDP.
ReplyDeleteThank you, now I totally understand how you guys relate the article and the economic concepts together !
ReplyDelete