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Chapter 12: Macroeconomics (page 428)

How do you calculate aggregate demand?

Short Answer

Expert verified

By taking the sum of all the four components of aggregate demand

Step by step solution

Aggregate Demand

These sectors can be represented in an equation also known as the aggregate demand equation.

AD=C+I+G+(X-M)

Consumption(C),
Investments(I),
Government spending(G),
exports, and imports(X-M).

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Most popular questions from this chapter

Suppose someone says, “Using monetary or fiscal policy to pump up the economy is counterproductive —you get a brief high, but then you have the pain of inflation.”

a. Explain what this means in terms of the AD-AS model.

b. Is this a valid argument against stabilization policy? Why or why not?

What is the national income multiplier?

Why does the aggregate demand curve slope down?

A rise in productivity increases potential output, but some worry that demand for the additional output will be insufficient even in the long run. How would you respond?

How does aggregate demand effect economic growth?

See all solutions