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How do the variables from the GDP Expenditure equation affect the aggregate demand curve?

How do the variables from the GDP Expenditure equation affect the aggregate demand curve?

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Answer #2

AD=C+I+G+X-M

GDP expenditure function=C+I+G+X-M

It means aggregate demand constitute consumption expenditure, investment expenditure, government expenditure export and imports.

When either of consumption expenditure, investment expenditure, government expenditure and export increases or import decreases, AD increases and this leads to shift in the AD curve rightward from AD1 to AD2.

When either of consumption expenditure, investment expenditure, government expenditure and export decreases or import increases, AD decreases and this leads to shift in the AD curve leftward from AD1 to AD3.

answered by: anonymous
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