The Aggregate demand reference article from the English Wikipedia on 24-Apr-2004 (provided by Fixed Reference: snapshots of Wikipedia from wikipedia.org)

Aggregate demand

In economics, aggregate demand is the total demand for goods and services in the economy. Put another way, it is the demand for the Gross Domestic Product of a country (the total new production sold through the market). This demand consists of four major parts:

• personal consumption expenditures (C), demand by households and unattached individuals,

• gross private domestic investment (I), demand by business firms and some individuals, for new factories, machinery, computer software, housing, other structures, and inventories.

• gross government investment and consumption expenditures (G).

• net exports (NX), i.e., net demand by the rest of the world for the country's output.

In Keynesian economics, not all of gross private domestic investment counts as part of aggregate demand. Much or most of the investment in inventories can be due to a short-fall in demand (unplanned inventory accumulation or general over-production). Thus, only the planned or intended part of investment (Ip) is counted as part of aggregate demand.

In sum, for a single country, aggregate demand = C + Ip + G + NX.

Sometimes, "aggregate demand" refers to an entire demand curve, so that we could refer to an "aggregate quantity demanded" (C + Ip + G + NX in real terms) at any given aggregate average price level (such as the GDP deflator).

Aggregate supply helps determine the extent to which increases in aggregate demand lead to increases in real output or instead to increases in prices (inflation).

-- 22:55, 7 Apr 2004 (UTC) Jim Devine

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