What causes the aggregate demand curve to shift?

Aggregate demand is the total demand for all goods and services in an economy; it is essentially gross domestic product. Its components are consumption, investment, government spending and net exports (exports - imports). A shift can be caused by a change in any of these components.
For example, an increase in government spending would cause the aggregate demand curve to shift to the right, which makes sense because you would expect this increased spending and demand in the economy to increase gross domestic product. Conversely, a reduction in net exports (through less exports or more imports) would cause a shift to the right.

JW

Related Economics A Level answers

All answers ▸

Why do firms only make normal profit in a perfectly competitive market?


Why does excessive consumption of alcohol lead to negative externalities ?


Discuss the impact that Brexit may upon the UK economy (25 marks)


Analyse the effects on the UK economy of a recession in another economy with trade ties.