Question

Define aggregate demand and expenditures in your own words. How are aggregate demand and aggregate expenditures related? minimum of 250 words

Answer 1

Aggregate Demand :-

The total spending on all goods and services in a period of time at a given price level is called aggregate demand.

In other words it may be defined as a schedule or curve that shows the total quantity of goods and services demanded at different price levels.

Determinants of aggregate demand:-

Factors such as consumption spending, investment, government spending, and net exports that, if they change, shift the aggregate demand curve.

Aggregate Expenditures :-

the sum of all expenditures made in an economy on consumption, gross investment, government purchases and net exports.

In equilibrium, Aggregate Expenditure = income or real GDP

Relation between aggregate demand and aggregate expenditure:-

The change in aggregate output demanded depends on how much the aggregate expenditure line shifts, not on which spending component causes the shift.

aggregate expenditure line is a relationship tracing, for a given price level, spending at each level of income, or real GDP; the total of C + I + G + (X-M) at each level of income, or real GDP