Learning objectives
Define aggregate demand (AD) as total planned spending on final goods and services at each price level and identify its components: consumption, investment, government purchases and net exports
Explain why the AD curve slopes downward using the wealth (real balances) effect, the interest rate effect and the exchange rate (foreign trade) effect
Distinguish a movement along the AD curve caused by a change in the price level from a shift caused by a change in one of its components
Identify the determinants that shift AD: consumer and business confidence, household wealth, interest rates, taxes and government spending, foreign incomes and exchange rates
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