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Aggregate Demand and Aggregate Supply Notes PDF
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Aggregate Demand and Aggregate Supply Notes
Aggregate Demand refers to the total value of all final goods and services that are planned to buy by all the sectors of the economy at a given level of income during a period of time. AD represents the total expenditure on goods and services in an economy during a period of time.
Components of Aggregate demand are:
- Household consumption expenditure (C).
- Investment expenditure (I).
- Govt. consumption expenditure (G).
- Net export (X – M).
Thus, AD = C + I + G + (X – M)
In two sector economy AD = C + I
Aggregate Supply is the money value of all final goods and services available for purchase by an economy during a given period. It is the flow of goods and services in the economy. Since, the money value of final goods and services is equal to net value-added, AS is nothing but the national income.
AS = C + S
Aggregate supply represents the national income of the country. AS = Y (National Income).