The aggregate demand curve

Question 1

What is the AD curve

Answer 1

The AD curve shows the relationship between price level (y-axis) and real national output/GDP (x-axis) at a given moment

Question 2

How does AD curve

Answer 2

It is downwards sloping

Question 3

Price level

Answer 3

Represents average level of prices across the economy (CPI). Higher prices=inflation

Question 4

Change in components

Answer 4

A change in any of the components of aggregate demand will cause a shift inwards or outwards

Question 5

Shift outwards

Answer 5

An increase in aggregate demand will be caused by an increase in C,G,I or NX. This will cause the AD curve to shift outwards (right).

Question 6

Shift inwards

Answer 6

A decrease in aggregate demand will be caused by an decrease in C,G,I or NX. This will cause the AD curve to shift inwards (left).

Question 7

Multiplier

Answer 7

Change in national income (GDP) / Initial change in injection (G,I,X)