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 ▸

What is the effect on price and quantity on flight tickets when the oil price has increased.


Why do rising house prices cause an increase in aggregate demand?


Using Angola as an example, evaluate the view that MNCs play a positive role in the development of LEDCs. (25 marks)


Assess macroeconomic policies which might be used to respond to rising commodity prices during a period of slow economic growth