Welcome to Unit Three. In this video, we'll discuss aggregate demand. You can  see here the micro demand curve. Look, we'll see price on the vertical axis and  quantity on the horizontal axis. So the micro demand curve versus the macro  aggregate demand curve. You will find that prices and equilibrium will be in  different places. On a micro demand curve, you will see that this is measured on a more individualized basis versus the macro aggregate demand curve, which is viewed as a national, maybe a regional, at least, or even a global scale. Right.  So we want to find the demand of the consumer as a whole. Now, here we'll see in this graph average price level PL1 versus the real GDP on the quantity line  y1, where we meet here on the axis is our equilibrium point. Now let's look at the components of the aggregate demand, GDP again, GDP equals consumption  plus investment plus government spending plus the difference between exports  minus imports. Here you can see as each layer or each component is added  into the GDP figure. Our price or our level of GDP will continue to shift to the  right and grow larger. Now, the only thing that will change this is if we are  running a trade deficit where exports are less than imports. Okay, so if that's the  case, then we can move that GDP number back inwards to the left, creating a  lower GDP number if we are running a trade deficit. But if we are running a trade surplus. We will see that far right line continue to push further to the right. Now,  reasons for changes in components of aggregate demand, changes in  consumption could come from changes in income. You know, income levels can  go down. A family could, someone in the family could be unemployed, laid off,  something like that. Changes in interest rates. Banks are, you know, tightening  their their restrictions on on interest rates and loans. So therefore, you know, if if rates go up, there'll be less borrowing. If rates go down, there'll be more  borrowing. Changes in overall wealth expectations and consumer confidence.  This has to do a lot with our government policy as far as fiscal and monetary is  concerned, also inflationary policy. So, if we have good low inflation, our tax  policy is strong, and our monetary policy is in balance. You can expect that  consumers will be confident. But if things are growing out of control that will  really affect the consumer's confidence for the negative household indebtedness can weigh a major will be a major barrier for consumption if a household is in  debt that is less discretionary income for them to spend on luxuries or  necessities or anything else, and so that will put that will definitely have an effect on your consumption level in an economy. Changes in investment, interest rates change as interest rates fluctuate, so will the ability or the willingness to borrow  money, level of national income, what is our GDP like? Are is our GDP  continuing to grow or are we contracting? Technological changes. This will either help or hurt our ability to invest. As far as if if technology continues to increase  and get better, we, as an economy, will continue to increase and grow. If there's  any kind of clamp down or restriction on technological advances, we could see  some inefficiencies in the marketplace, expectations, and business confidence. 

Definitely, are a reflection of changes of investment level. As you see more  investment made into capital markets or in real estate deals, anything like that,  you know, you know that business and consumer confidence and expectations  are high. But if you're, you know, seeing you know down stock market or not as  much investment into you know special projects as far as real estate or things  like that nature is concerned. You can see that confidence is going to decrease.  Now there are many factors that predicate on government spending, on  changes in government spending, previous commitments for sure. If you know  we have welfare state and your government promotes that, obviously they'll be  spending more cash to ensure that you know we have social welfare, which isn't a bad thing. That is good. We need to ensure that people that are less fortunate  are taken care of, but that needs to be done in a controlled, responsible manner. Political views of a party in power-you know-some politicians or political parties  are more fiscally conservative, whereas some are more liberal in how they  spend and tax. Now changes in net exports, exports are foreign incomes, trade  policies, and exchange rates. Foreign incomes is what we receive back from  selling our goods and services in international markets. The trade policies now  the changes in exports due to trade policies such as barriers, tariffs, things of  that nature. Now they will affect our net exports if we have any of those put in  place. Exchange rates, exchange rates change all the time from one currency to another currency. Those fluctuations will either boost or you know decline your  net exports. Now let's look at imports. You know national incomes, trade  policies, and exchange rates. Again, same thing for trade policies and exchange rates. They vary, and if the trade policies that are implemented, you know, as far as tariffs and barriers and things of that nature, can real really increase the  amount of imports coming into a country, and if national incomes are lower than  years past, you will see that the amount of imports being purchased inside the  domestic economy will decrease. 



Last modified: Monday, September 21, 2026, 12:35 PM