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NOMINAL PRODUCTION: The market value of all production measured in current, actual prices. Nominal production is typically measured with nominal GDP.

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Lesson Contents
Unit 1: The Concept
  • What It Is
  • Circular Flow
  • Unit 1 Summary
  • Unit 2: Doing More
  • Expenditures
  • Consumption Expenditures
  • Investment Expenditures
  • Government Purchases
  • Net Exports
  • Unit 2 Summary
  • Unit 3: The Curve
  • Highlights
  • Slope
  • Real-Balance Effect
  • Interest-Rate Effect
  • Net-Export Effect
  • Unit 3 Summary
  • Unit 4: Determinants
  • Instability
  • Shifts: Increase
  • Shifts: Decrease
  • Unit 4 Summary
  • Unit 5: Policies Plus
  • Business Cycles
  • Policies
  • Unit 5 Summary
  • Course Home
    Aggregate Demand

    This lesson introduces aggregate demand, the demand-side of the aggregate market. The aggregate market is the key model used to explain and analyze the workings of the macroeconomy and aggregate demand is a critical half of this model (the other is aggregate supply). Taking a clue from market demand, this lesson examines the nature of aggregate demand, including the relation between the price level and aggregate expenditures, the reason the aggregate demand curve is negatively sloped, and the assorted aggregate demand determinants that cause the aggregate demand curve to shift.

    • The first unit of this lesson introduces the concept of aggregate demand and how it fits into the study of macroeconomics in terms of the aggregate market and circular flow.
    • In the second unit, we example the four aggregate expenditures -- consumption, investment, government purchases, and net exports -- the make up aggregate demand.
    • The third unit then examines the aggregate demand curve that captures the aggregate demand relation between the price level and aggregate expenditures, especially the importance of the real-balance, interest-rate, and net-export effects.
    • A look at the assorted aggregate demand determinants that shift the aggregate demand curves is the topic of the fourth lesson.
    • We end this lesson in the fifth unit with a look how demand-management policies work to stabilize business cycles through aggregate demand.

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    FEDERAL FUNDS

    A common term for Federal Reserve deposits held by commercial banks, especially when these deposits are loaned between banks through the Federal funds market. The interest rate charged for these interbank loans is termed the Federal funds rate. Federal funds are used by individual banks to meet reserve requirements and the total held by the banking system is manipulated by the Federal Reserve System in the conduct of monetary policy.

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    BLUE PLACIDOLA
    [What's This?]

    Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either a 50 foot extension cord or a combination CD player, clock radio, and telephone (with answering machine). Be on the lookout for cardboard boxes.
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    This isn't me! What am I?

    A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
    "The greatest things ever done on Earth have been done little by little. "

    -- William Jennings Bryan

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