The Aggregate Demand Curve
Economics: IB Diploma, topic 2.2.1
Aggregate Demand (AD)
AD is equal to the sum of net exports, consumption, investment and government spending at a given price level.
Aggregate Demand
- Aggregate Demand (AD) = Consumption (C) + Investment (I) + Government Spending (G) + Net Trade/Exports-Imports (X-M).
- Arguably, consumption is the most important component of the aggregate demand curve.
Aggregate demand curve
- The AD curve is downward sloping.
- Consumption will fall as the price level rises - a movement (not a shift) along the AD curve.
Test yourself on The Aggregate Demand Curve
What is the shape of the AD curve?
Which component is arguably the most important component of AD?
What is on the vertical axis of an AD graph?