In
macroeconomics, aggregate demand (AD) is defined as the total
demand for final goods and services, which will be purchased by the separate economic sectors
(individuals, firms and the state), at a given time and at all possible price levels. It shows
the correlation between the demand of goods and services and the general (aggregate) price level
in a given economy. The aggregate demand is graphically shown with the aggregate
demand curve, which slopes downward as a result of three effects: Pigou's wealth
effect, Keynes' interest rate effect and the Mundell-Fleming exchange-rate effect.
The
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