What is Aggregate demand? Aggregate demand is the sum total of demand by all sectors in an economy, namely, consumers, firms, government, foreigners. In these videos, we explain, how do depict aggregate demand graphically, where does the equilibrium in an economy lies? What is an autonomous part of aggregate demand?

If an economy is given a shock, in terms of either increase in government spending or an increase in autonomous investment or fall in taxes or an increase in money supply, then how does aggregate demand curve shifts?

Lastly, we discuss, why total increase in income is more than the initial shock (in terms of above discussed factors). This is explained by Multiplier process. What is multiplier? How is it derived? Hoe is the process of multiplier is depicted on a diagram? Continue reading →