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Transcript
Remember circular flow…
Wages, Rent,
Dividends
Labour
Goods &
Services
Consumption
Spending
Aggregate Demand


the total demand for goods and
services produced within the
economy
AD = C + I + G + (X-M)
Price
Level
AD
GDP / Real
National Output
Slopes downward &
to the right:
1. a general fall in
prices increases
the real value of
wealth so
increases AD
(we can afford to
buy more!)
2. It also lowers
the prices of our
goods compared
to other
countries
leading to
increased
exports.
Shifts in AD

changes in the components of aggregate
demand will cause a shift in the AD curve (
C, I, G, X or M)
Price
Level
AD1
This outward shift
could be caused by
 C,I,G,X or  M
  AD
AD
GDP
AD does not always increase. If it decreases it can lead to recession.
This would be as a result of C,I,G,X or M.