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1. Briefly describe, how and why the macroeconomic aggregated demand,AD curve is responsible to the Macroeconomic...

1. Briefly describe, how and why the macroeconomic aggregated demand,AD curve is responsible to the Macroeconomic General Price Level P

Can you please explain this

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Answer #1

Aggregate demand shows an economic measurement of total amount of demand for all finished goods and services produced in an economy.these represent the total demand for goods and services at any given price level.aggregate demand equals GDP in the long run after adjusting price level.as we know short run aggregate demand measure total output for a single nominal price level whereby nominal is not adjusted for inflation.demand increases or decreases along the curve as prices for goods and services either increase or decrease.

If there is any increase in any of the components of aggregate demand shifts the AD curve to the right.when this shift towards right then it increase the level of production and average price level.when economy gets close to potential output the price will increase more than the output as the AD rises.

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