Definition of Aggregate Demand

Aggregate Demand

Total quantity of goods and services demanded.

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.

45-Degree Line

A line representing equilibrium in the goods and services market, on a diagram with aggregate demand on the vertical axis and aggregate supply on the horizontal axis.

AD

aggregate demand.

Aggregate Expenditure Curve

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

Crowding Out

Decreases in aggregate demand which accompany an expansionary fiscal policy, dampening the impact of that policy.

Demand Management Policy

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

Incomes Policy

A policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example.

Transmission Mechanism

The channels by which a change in the demand or supply of money affects aggregate demand for goods and services.

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.

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A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.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Checking accounts that pay no interest and can be withdrawn upon demand.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 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.

Excess Demand

A situation in which demand exceeds supply.

Hedging demands

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

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.

Precautionary demand (for money)

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

Speculative demand (for money)

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

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.

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