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The aggregate demand depends on various variables, here referring to components of aggregate demand. The two main concepts that describe changes in the aggregate demand are expenditure and output.

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Introduction

Data Response Question, page 178 Define the following: * Aggregate demand: Aggregate demand can be simply defined as the total demand of goods and services in the economy at a given price and fixed time period. In other words, it is the sum of expenditure components. * Disposable income: The income left to an individual after taxes have been cut off, and the rest can be used to spend of luxuries. * Durable goods: goods that are used by consumers over a long period of time. * Investment: addition of capital stock to the economy. Use a diagram to explain the change in the components of aggregate demand The aggregate demand depends on various variables, here referring to components of aggregate demand. ...read more.

Middle

This article talks about how taxes have affected growth and how businesses are reluctant to invest. This text refers to two main concepts of investment; they are changes in the level of national income and business confidence. It has been clearly stated that household wages and salaries climbed by 0.8% in the third quarter.....disposable incomes rose by only 0.2%. As national income rises, consumption rises. In this case, every business needs to invest to meet the demand of consumers. In short, national income is directly proportional to investment. However, here the disposable income has only rose by 0.2%. This certainly means that consumption wouldn't grow heavily, but only by a bit. ...read more.

Conclusion

Investment has slightly changed in this text: business investment rose by a tiny 0.3%. This leads to a slight increase in aggregate demand, see below! This is a rough representation of how a change in investment would result in a shift of the AD curve. In this case, AD1 represents the current demand (no figure) and AD2 represents a shift to the right which means there is an increase in the aggregate demand due to an increase in investment by 0.3%(not shown) It is clear that if any of the components of aggregate demand increases by little, then aggregate demand either shifts by a little or not at all. In this case study, aggregate demand has fallen due to other factors (not focused) ?? ?? ?? ?? Rahul Ganji Economics ...read more.

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