Determinants of Aggregate Demand
AD looks at the relationship between prices and quantity.it is the total value of allfinal goods and services that consumers, businesses, government and those outside of the country are willing nd able to buy at various price level. when prices goes up the real GDP goes down and when prices goes down, Rel GDP goes up.AD is down ward slopping
Change in consumtion spending
  • wealth effect goes up- AD increases
  • age of durable goods goes up- AD increases
  • consumer optimistic about the future , AD up
Change in Investment spending
  • Red tape goes down- AD increases
  • age of capital goods goes up- AD increases
  • spare capacity down , AD up
  • interest rate decreases- AD increases
  • firms are pessimistic- AD decreases
Changes in net export
  • foreign income goes up- AD up
  • like Canadian goods- AD up
  • CAD depreciates - AD up
  • prices of foreign goods go up - AD up
Changes in government spending goes up - AD goes up
Changes in monetary supply
  • interest rate goes down - AD goes up
  • money supply goes up - AD goes up
Fiscal policy - taxes goes down - AD goes up



Dr. Stephanie Powers, "Aggregate Demand", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)
spare capacity increases- AD increases
spare capacity increases- AD increases