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

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.