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Aggregate Demand Curve

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Definition of Aggregate Demand Curve

Aggregate Demand Curve Image 1

Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.



Related Terms:

Aggregate Demand

Total quantity of goods and services demanded.


Aggregate Expenditure Curve

aggregate demand for goods and services drawn as a function of the level of national income.


Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.


Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.


Aggregate Supply

Total quantity of goods and services supplied.



Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not.


Demand

An amount desired, in the sense that people are willing and able to pay to obtain this amount. Always associated with a given price.


Aggregate Demand Curve Image 2

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.


Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.


Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.


Demand Loan

A loan which must be repaid in full on demand.


Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.


Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.


Demand-Pull Inflation

Inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.


Demand shock

An event that affects the demand for goods in services in the economy.


Discount curve

The curve of discount rates vs. maturity dates for bonds.


Aggregate Demand Curve Image 3

Excess Demand

A situation in which demand exceeds supply.


Flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.



Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.


Indifference curve

The graphical expression of a utility function, where the horizontal axis measures risk and
the vertical axis measures expected return. The curve connects all portfolios with the same utilities according
to g and s .


J-curve

Theory that says a country's trade deficit will initially worsen after its currency depreciates because
higher prices on foreign imports will more than offset the reduced volume of imports in the short-run.


Laffer Curve

curve showing how tax receipts vary with the tax rate.


learning curve

a model that helps predict how labor time
will decrease as people become more experienced at performing
a task and eliminate the inefficiencies associated
with unfamiliarity


Monetary Aggregate

Any measure of the economy's money supply.


Money market demand account

An account that pays interest based on short-term interest rates.


Non-parallel shift in the yield curve

A shift in the yield curve in which yields do not change by the same
number of basis points for every maturity. Related: Parallel shift in the yield curve.


Par yield curve

The yield curve of bonds selling at par, or face, value.


Parallel shift in the yield curve

A shift in the yield curve in which the change in the yield on all maturities is
the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one
percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as
well.
Related: Non-parallel shift in the yield curve.



Phillips Curve

Relationship between inflation and unemployment.


Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.


Riding the yield curve

Buying long-term bonds in anticipation of capital gains as yields fall with the
declining maturity of the bonds.


Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.


Spot curve, spot yield curve

See Zero curve.


Spot rate curve

The graphical depiction of the relationship between the spot rates and maturity.


Steepening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.


Stopping curve

A curve showing the refunding rates for different points in time at which the expected value
of refunding immediately equals the expected value of waiting to refund.


Stopping curve refunding rate

A refunding rate that falls on the stopping curve.


Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.


Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.


Variable rated demand bond (VRDB)

Floating rate bond that can be sold back periodically to the issuer.


Warehouse demand

The demand for a part by an outlying warehouse.


Yield curve

The graphical depiction of the relationship between the yield on bonds of the same credit quality
but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of
the yield curve (short-term rates greater than long term rates) have preceded the last five U.S. recessions. The
yield curve can accurately forecast the turning points of the business cycle.


Yield Curve

A graphical representation of the level of interest rates for
securities of differing maturities at a specific point of time


Yield curve

Graph of yields (vertical axis) of a particular type of security
versus the time to maturity (horizontal axis). This curve usually slopes
upward, indicating that investors usually expect to receive a premium for
securities that have a longer time to maturity. The benchmark yield curve is
for U.S. Treasury securities with maturities ranging from three months to 30
years. See Term structure.


yield curve

Graph of the relationship between time to maturity and yield to maturity.


Yield curve

A graph showing how the yield on bonds varies with time to maturity.


Yield curve option-pricing models

Models that can incorporate different volatility assumptions along the
yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.


Yield curve strategies

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.


Zero curve, zero-coupon yield curve

A yield curve for zero-coupon bonds;
zero rates versus maturity dates. Since the maturity and duration (Macaulay
duration) are identical for zeros, the zero curve is a pure depiction of supply/
demand conditions for loanable funds across a continuum of durations and
maturities. Also known as spot curve or spot yield curve.



 

 

 

 

 

 

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