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Aggregate demand - Coggle Diagram
Aggregate demand
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The AD curve
The international effect
A rise in the price level will reduce demand for net exports as exports will become less price competitive while imports will become more price competitive.
The interest rate effect
A rise in the price level will increase demand for money to pay the higher prices. This, in turn, will increase the interest rate. A higher interest rate usually results in a reduction in consumption and investment.
The wealth effect
A rise in the price level will reduce the demand of goods and services. Consumer purchasing power will then fall.
Definition
the total spending on an economy’s goods and services at a given price level in a given time period.