Aggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply Aggregate Demand : It refers to the total value of final goods and services which all the sectors of an economy are planning to buy at a given level of income during a period of an accounting year. It is measured in the terms of total expenditure on goods and services of households, firms, government of the economy. Or we can say that it is aggregate expenditure on consumption and investment that all sectors of the economy are willing to incur at each income level. Thus, the term aggregate demand and aggregate expenditure are used interchangeably. It is a flow concept as it is generally measured for an accounting period. It refers to a planned expenditure and not the actual expenditure. Aggregate Demand is denoted by AD. According to Keynes, aggregate demand refers to the total amount of money, that the buyers are ready to spend on goods and services, produced in an economy during a given period. Components of Aggregate Demand: 1-...