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Shifting Aggregate Demand definitions

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  • Aggregate Demand
    Total spending on goods and services in an economy, influenced by consumption, investment, government spending, and net exports.
  • Consumption
    Spending by households on goods and services, affected by factors like taxes and income.
  • Investment
    Expenditure by businesses on capital goods, shaped by economic expectations and future prospects.
  • Government Spending
    Purchases of goods and services by the public sector, determined by policy decisions and fiscal actions.
  • Net Exports
    Difference between a country's exports and imports, influenced by exchange rates and global demand.
  • Exchange Rates
    Relative value of one currency to another, affecting the price competitiveness of domestic versus foreign products.
  • GDP
    Measure of total economic output, impacted by changes in aggregate demand components.
  • Price Level
    Average of current prices across the economy, changes cause movement along the aggregate demand curve.
  • Aggregate Demand Curve
    Graphical representation showing the relationship between total demand and price level in an economy.
  • Wealth Effect
    Impact of changes in price level on consumer purchasing power and spending.
  • Interest Rate Effect
    Influence of price level changes on borrowing costs and investment decisions.
  • Foreign Price Effect
    Effect of domestic price changes on demand for foreign versus domestic goods.
  • Taxes
    Compulsory payments to government, affecting disposable income and consumption.
  • Economic Expectations
    Outlook regarding future economic conditions, shaping investment and spending decisions.
  • Market Equilibrium
    State where aggregate demand equals aggregate supply, determining overall output and price level.