9.1 Aggregate Demand (AD) and the AD Curve

Question 1

What is aggregate demand?

Answer 1

The total quantity of goods and services that all buyers in an economy want to buy over a particular time period, at different possible price levels, ceteris paribus.

Includes consumers, firms, the government, and foreigners.

Question 2

What does the aggregate demand (AD) curve represent?

Answer 2

The total quantity of goods and services produced in an economy over a particular time period, at different price levels, ceteris paribus.

Reflects the relationship between price levels and output.

Question 3

What is consumer confidence?

Answer 3

A measure of the degree of optimism of consumers about their future income and the future of the economy, based on surveys of consumers.

Important determinant of aggregate demand.

Question 4

How is wealth defined in the context of aggregate demand?

Answer 4

The money or things of value that people own minus debts to banks or other financial institutions.

Impacts consumer spending and overall demand.

Question 5

What are income taxes?

Answer 5

Taxes paid by households on their incomes.

Affect disposable income and consumer spending.

Question 6

Define household indebtedness.

Answer 6

The degree to which households have debts.

Higher indebtedness can reduce consumer spending.

Question 7

What is business confidence?

Answer 7

A measure of the degree of optimism among firms in an economy about the future performance of firms and the economy, based on surveys of business managers.

Important determinant of the investment component of aggregate demand.

Question 8

What does corporate indebtedness refer to?

Answer 8

The degree to which corporations have debts.

Can influence investment decisions and overall economic activity.