Aggregate Demand Curve

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  • A curve showing an inverse relationship between the general price level and real output or gross domestic product (GDP) when other variables are held constant (ceteris paribus).

    Aggregate Demand

    Unlike a single market demand curve, the aggregate demand curve is a summation of demand in a macroeconomy (an economy as a whole) in relation to changes in the general price level (usually measured by the consumer price index, or CPI). The summation of demand reflects the reaction of consumers, investors, and foreigners to changes in price level.

    A change in the general price level generates wealth, interest rate, and international trade effects, because when prices change, people may desire more or less money (wealth effect) and foreigners may buy more or less (international trade effect) goods depending on ...

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