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Social Sci LibreTexts

6: Aggregate Expenditure and Aggregate Demand

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  • in this chapter we will explore:

    • 6.1 Short run aggregate demand and output
    • 6.2 Consumption, saving and investment
    • 6.3 Exports and imports
    • 6.4 Aggregate expenditure & equilibrium output
    • 6.5 The multiplier
    • 6.6 Equilibrium output and the AD curve

    In Chapter 5 we saw that real output and employment are sometimes smaller, and at other times larger, than potential output YP. According to our aggregate demand and aggregate supply model, short-run changes in AD and AS conditions cause these fluctuations in output. But why do AD and AS conditions fluctuate? To answer this question, we begin with a simple short-run model of the economy.