In
macroeconomics, AD (aggregate demand) refers to demand for all goods and
services in the economy during a period of time (generally, one year).
AD
is measured in terms of expenditure on all the goods and services in the
economy during a period of time.
Simple
Keynesian model of income determination states that an economy’s total income
in the short – run is determined by desired
aggregate demand or aggregate
spending of the people. The more is the desired demand of the people, more
amount of goods and services that firms can sell. The more goods and services
firms can sell, the more output they will like to produce and more workers they
will employ.
Components of AD
Aggregate demand is the total amount of goods and
services demanded in the economy. It refers to the desired intended or planned
demand or spending by the people, i.e. the total amount of goods and services
they would like to purchase.
