Google
Monday 
July 16, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
APPRECIATION: A more or less permanent increase in value or price. "More or less permanent" doesn't include temporary, short-term jumps in price that are common in many markets. Appreciation is only those price increases that reflect greater consumer satisfaction and thus value. While all sorts of stuff can appreciate in value, some of the more common ones are real estate, works of art, corporate stock, and money. In particular, the appreciation of a nation's money is seen by an increase in the exchange rate caused by a growing, expanding, and healthy economy.

Visit the GLOSS*arama


CHANGE IN AGGREGATE DEMAND:

A shift of the aggregate demand curve caused by a change in one of the aggregate demand determinants. A change in aggregate demand is caused by any factor affecting aggregate demand EXCEPT the price level. This is one of two changes related to aggregate demand. The other is a change in aggregate expenditures. A change in aggregate demand is comparable to a change in market demand.
A change in aggregate demand is a shift in the aggregate demand curve. Because aggregate demand includes ALL price level-aggregate expenditure combinations, a change in aggregate demand is a change in ALL price level-aggregate expenditure combinations, meaning that each price level is matched up with a different aggregate expenditure after the change. This is illustrated as a shift of the aggregate demand curve. This change in aggregate demand is caused by a change in any of the aggregate demand determinants.

In contrast, a change in aggregate expenditures is a change from one price level-aggregate expenditure combination on a given aggregate demand curve to another point on the same curve. This is illustrated as a movement along a given aggregate demand curve.

Change in Aggregate Demand
Change in Aggregate Demand

This exhibit to the right displays a standard aggregate demand curve. Two buttons are displayed beneath this graph. One, labeled [Determinant], demonstrates a determinant-driven change in aggregate demand. For comparison purposes, the other, labeled [Price Level], illustrates a price level-induced change in aggregate expenditures.

A click of the [Determinant] button triggers a shift of the aggregate demand curve, in particular, a rightward shift representing an increase in aggregate demand. A click of the [Price Level] button triggers a movement along the aggregate demand curve.

Why is this difference so important? The answer is as simple as cause and effect. The aggregate demand curve is used (together with the long-run and short-run aggregate supply curves) to explain and analyze macroeconomic events, especially business-cycle instability. The sequence of events follows a particular pattern.

  • First, a determinant (of either aggregate demand or aggregate supply) changes.

  • Second, this determinant change causes the aggregate demand curve or one of the aggregate supply curves to shift. An aggregate demand determinant change causes a shift of the aggregate demand curve and an aggregate supply determinant change causes a shift in one of the aggregate supply curves.

  • Third, the change in aggregate demand or aggregate supply causes an imbalance in the aggregate market (an economy-wide shortage or surplus). The aggregate market is in a temporary state of disequilibrium.

  • Fourth, the economy-wide shortage or surplus causes the price level to change.

  • Fifth, the change in the price level causes a change in aggregate expenditures and possibly real production.

  • Sixth, the changes in aggregate expenditures and/or real production eliminate the shortage or surplus and restore equilibrium.
The key conclusion is that aggregate demand (and aggregate supply) determinants, which induce changes in aggregate demand (and aggregate supply), are the source of instability in the aggregate market. The change in the price level, which induces a change in aggregate expenditures (and real production) is the means of eliminating the instability and restoring equilibrium.

<= CHAIRMAN OF THE BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEMCHANGE IN AGGREGATE EXPENDITURES =>


Recommended Citation:

CHANGE IN AGGREGATE DEMAND, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 16, 2018].


Check Out These Related Terms...

     | change in aggregate expenditures | aggregate demand shifts | change in aggregate supply | change in real production | slope, aggregate demand curve |


Or For A Little Background...

     | aggregate demand | aggregate expenditures | aggregate demand and market demand | price level | real production | demand | market demand | change in demand | change in quantity demanded |


And For Further Study...

     | interest rate, aggregate demand determinant | federal deficit, aggregate demand determinant | inflationary expectations, aggregate demand determinant | money supply, aggregate demand determinant | consumer confidence, aggregate demand determinant | exchange rates, aggregate demand determinant | physical wealth, aggregate demand determinant | financial wealth, aggregate demand determinant | aggregate supply determinants | AS-AD model |


Search Again?

Back to the WEB*pedia


APLS

YELLOW CHIPPEROON
[What's This?]

Today, you are likely to spend a great deal of time wandering around the downtown area wanting to buy either a genuine down-filled pillow or one of those "hang in there" kitty cat posters. Be on the lookout for a thesaurus filled with typos.
Your Complete Scope

This isn't me! What am I?

Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
"The only thing that will stop you from fulfilling your dreams is you. "

-- Tom Bradley, former Los Angeles mayor

IEBNR
Income Earned But Not Received
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster